A concentrated growth-focused portfolio with high U.S. exposure and limited diversification

Report created on Jan 21, 2025

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

The portfolio is heavily weighted towards the iShares Core S&P 500 ETF, which constitutes 55.94% of the total allocation. This ETF provides broad exposure to large-cap U.S. equities, aligning with a growth-oriented strategy. However, the concentration in a single ETF suggests limited diversification. Other significant holdings include the Avantis U.S. Small Cap Value ETF at 17.14%, and individual stocks like Apple Inc, Delta Air Lines Inc, and NVIDIA Corporation. This composition leans heavily on U.S. equities, potentially increasing vulnerability to domestic market fluctuations. To enhance diversification, consider incorporating international equities or other asset classes like bonds or real estate investment trusts (REITs).

Growth Info

Historically, the portfolio has delivered an impressive Compound Annual Growth Rate (CAGR) of 23.15%, outperforming many benchmarks. However, it has also experienced a maximum drawdown of -36.43%, indicating significant volatility during market downturns. This performance pattern is typical for growth-focused portfolios, which prioritize capital appreciation over stability. While past performance is not a predictor of future results, the high returns suggest potential for continued growth. To mitigate drawdowns, consider adding more defensive assets that can provide stability during market turbulence.

Projection Info

The Monte Carlo simulation projects a wide range of potential outcomes, with a median return of 3,355.7% and a 5th percentile outcome of 179.8%. This analysis uses historical data to simulate future performance, offering insights into possible portfolio trajectories. While 992 out of 1,000 simulations showed positive returns, it's important to remember that simulations rely on past data and assumptions, which may not hold in future market conditions. To prepare for various scenarios, consider stress-testing your portfolio against different economic environments and adjusting allocations accordingly.

Asset classes Info

  • Stocks
    100%

The portfolio is entirely composed of equities, with no allocation to cash or fixed-income assets. This 100% stock allocation suggests a high-risk, high-reward strategy typical for growth-seeking investors. While equities offer significant growth potential, they also come with increased volatility. Diversifying into other asset classes, such as bonds or commodities, could help balance risk and potentially smooth returns over time. Consider incorporating a mix of asset classes to enhance the portfolio's resilience against market fluctuations.

Sectors Info

  • Technology
    41%
  • Industrials
    13%
  • Financials
    12%
  • Consumer Discretionary
    9%
  • Health Care
    6%
  • Telecommunications
    6%
  • Energy
    5%
  • Consumer Staples
    4%
  • Basic Materials
    2%
  • Utilities
    1%
  • Real Estate
    1%

With 41% of the portfolio in technology, there's a notable sector concentration that could result in higher volatility, especially during periods of technological disruption or regulatory changes. The remaining investments are spread across sectors like industrials, financial services, and consumer cyclicals. This sector allocation aligns with a growth strategy but may expose the portfolio to sector-specific risks. To mitigate these risks, consider diversifying into underrepresented sectors like utilities or real estate, which can offer stability and income.

Regions Info

  • North America
    99%

The portfolio's geographic allocation is overwhelmingly focused on North America, with 99% of assets in this region. This lack of international exposure limits diversification benefits and may increase vulnerability to U.S.-specific economic risks. Global diversification can reduce portfolio volatility and capture growth opportunities in other regions. Consider adding international equities or emerging market funds to enhance geographic diversification and potentially improve risk-adjusted returns.

Market capitalization Info

  • Mega-cap
    47%
  • Large-cap
    25%
  • Mid-cap
    10%
  • Small-cap
    9%
  • Micro-cap
    8%

The portfolio is heavily weighted towards mega-cap stocks, which make up 47% of the total allocation. This bias towards larger companies can provide stability and liquidity, but it may also limit exposure to the growth potential of smaller firms. The presence of small and micro-cap stocks, at 9% and 8% respectively, adds some diversification but remains minimal. To capture the growth opportunities of smaller companies, consider increasing the allocation to small and mid-cap stocks.

Risk vs. return

This chart shows the Efficient Frontier, calculated using your current assets with different allocation combinations. It highlights the best balance between risk and return based on historical data. "Efficient" portfolios maximize returns for a given risk or minimize risk for a given return. Portfolios below the curve are less efficient. This is informational and not a recommendation to buy or sell any assets.

Click on the colored dots to explore allocations.

The portfolio could benefit from optimization using the Efficient Frontier, which identifies the best possible risk-return ratio for a given set of assets. Currently, the portfolio's high concentration in U.S. equities and technology suggests potential for optimization by adjusting allocations. By diversifying into other asset classes and regions, the portfolio could achieve a more efficient balance between risk and return. This optimization would not necessarily compromise growth but rather enhance the portfolio's stability and resilience.

Dividends Info

  • Apple Inc 0.40%
  • Avantis® U.S. Small Cap Value ETF 1.60%
  • Delta Air Lines Inc 0.80%
  • iShares Core S&P 500 ETF 1.30%
  • Weighted yield (per year) 1.11%

The portfolio has a modest total dividend yield of 1.11%, with individual contributions from holdings like the iShares Core S&P 500 ETF and Avantis U.S. Small Cap Value ETF. While dividends provide a steady income stream, this portfolio's focus is on growth rather than income. For investors seeking higher income, increasing exposure to dividend-paying stocks or funds could enhance cash flow. However, this may require balancing growth expectations with income needs.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • iShares Core S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.06%

The portfolio's total expense ratio (TER) is impressively low at 0.06%, primarily driven by the low-cost iShares Core S&P 500 ETF. Keeping costs minimal is crucial for maximizing long-term returns, as high fees can erode investment gains over time. This cost efficiency aligns well with the growth strategy, allowing more capital to compound. Ensure that future investments also prioritize low-cost options to maintain this advantage and support better performance.

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