A balanced portfolio with high growth focus and limited geographic diversification

Report created on Dec 16, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

This portfolio is composed mainly of ETFs, with a strong emphasis on growth-oriented funds. The largest holding is the Vanguard Russell 1000 Growth Index Fund ETF, accounting for about 23% of the portfolio. Other significant holdings include the Vanguard Total Stock Market Index Fund and the Vanguard S&P 500 Growth Index Fund. This composition suggests a focus on capital appreciation, leveraging the performance of large-cap U.S. stocks. However, the portfolio lacks diversification across asset classes, with almost all investments in equities. This concentration can lead to increased volatility, especially during market downturns.

Growth Info

Historically, the portfolio has performed well, with a compound annual growth rate (CAGR) of 16.16%. This suggests that the portfolio has capitalized on the strong performance of U.S. equities in recent years. However, it also experienced a maximum drawdown of -17.16%, indicating vulnerability during market corrections. The high returns are concentrated in a few trading days, which can be risky if those days are missed. While past performance is not indicative of future results, it provides insight into how the portfolio has reacted to market conditions historically.

Projection Info

Monte Carlo simulations project potential future outcomes using historical data, offering a range of scenarios for portfolio performance. The median (50th percentile) projection suggests a substantial growth of 733.94%, while the 5th percentile indicates a more conservative outcome of 172.55%. These simulations highlight the portfolio's potential for high returns but also underscore the inherent uncertainties. It's important to remember that these projections are based on past data and do not account for future market changes or unforeseen events. Therefore, they should be used as one of several tools for decision-making.

Asset classes Info

  • Stocks
    99%
  • No data
    1%

The portfolio is heavily skewed towards stocks, making up over 99% of the total allocation. This lack of exposure to other asset classes like bonds or commodities limits diversification benefits. While equities can provide high returns, they also come with increased volatility. Diversifying into other asset classes could help mitigate risk and provide a buffer during periods of market turbulence. Investors might consider introducing a small percentage of fixed income or alternative investments to balance the risk-return profile more effectively.

Sectors Info

  • Technology
    37%
  • Consumer Discretionary
    12%
  • Financials
    11%
  • Telecommunications
    10%
  • Health Care
    10%
  • Industrials
    7%
  • Consumer Staples
    6%
  • Energy
    4%
  • Basic Materials
    1%
  • Real Estate
    1%
  • Utilities
    1%

Sector allocation reveals a concentration in technology, which constitutes nearly 37% of the portfolio. Other sectors like consumer cyclicals and financial services also hold significant portions. This sectoral bias can lead to higher volatility, especially if the technology sector underperforms. While investing in high-growth sectors can yield substantial returns, it's essential to maintain a balanced approach. Diversifying across a broader range of sectors can reduce risk and enhance stability, especially during sector-specific downturns.

Regions Info

  • North America
    100%

The portfolio is predominantly invested in North American assets, with over 99% exposure. This geographic concentration limits the benefits of global diversification, which can provide a hedge against regional economic downturns. While North America has been a strong performer, expanding exposure to other regions could capture growth opportunities in emerging markets and developed economies outside the U.S. Diversifying geographically can also reduce currency risk and enhance long-term portfolio stability.

Redundant positions Info

  • Vanguard Russell 1000 Growth Index Fund ETF Shares
    Vanguard S&P 500 ETF
    JPMorgan Nasdaq Equity Premium Income ETF
    Vanguard Total Stock Market Index Fund ETF Shares
    Vanguard S&P 500 Growth Index Fund ETF Shares
    High correlation

The portfolio exhibits high correlation among its assets, particularly among the Vanguard funds and the JPMorgan ETF. This means that these assets tend to move in the same direction, which can amplify risk during market downturns. High correlation reduces the diversification benefits, as the portfolio's performance becomes more sensitive to market fluctuations. To enhance risk management, consider replacing some of the highly correlated assets with those that have a lower correlation, providing better diversification and stability.

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 seeks the best risk-return ratio. Currently, there are overlapping assets that are highly correlated, offering limited diversification benefits. By adjusting the allocation among existing assets, the portfolio can potentially achieve a more efficient balance. This doesn't necessarily mean adding new assets but rather reallocating within the current selection to maximize returns for a given level of risk. It's important to align these changes with investment goals and risk tolerance.

Dividends Info

  • JPMorgan Nasdaq Equity Premium Income ETF 9.30%
  • Schwab U.S. Dividend Equity ETF 3.50%
  • Vanguard Russell 1000 Growth Index Fund ETF Shares 0.60%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard S&P 500 Growth Index Fund ETF Shares 0.60%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.20%
  • Weighted yield (per year) 1.67%

The portfolio's dividend yield stands at 1.67%, with the JPMorgan Nasdaq Equity Premium Income ETF contributing the highest yield at 9.3%. Dividends provide a steady income stream and can enhance total returns, especially in volatile markets. However, the overall yield is relatively low, suggesting a focus on growth rather than income. Investors seeking regular income might consider increasing their allocation to higher-yielding assets or funds that prioritize dividend payments, balancing growth with income generation.

Ongoing product costs Info

  • JPMorgan Nasdaq Equity Premium Income ETF 0.35%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • Vanguard Russell 1000 Growth Index Fund ETF Shares 0.08%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard S&P 500 Growth Index Fund ETF Shares 0.10%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Weighted costs total (per year) 0.07%

The portfolio's total expense ratio (TER) is 0.07%, reflecting a cost-effective investment strategy. Lower costs can significantly enhance long-term returns by reducing the drag on performance. However, the JPMorgan ETF has a higher expense ratio of 0.35%, which could be optimized by exploring similar funds with lower fees. Keeping costs in check is crucial for maximizing net returns, especially in a low-interest-rate environment where every basis point counts. Regularly reviewing and optimizing for lower-cost alternatives can be beneficial.

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