A US-centric portfolio with heavy reliance on large-cap equities and limited international exposure

Report created on Jan 9, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

The portfolio is heavily weighted towards the Vanguard S&P 500 ETF, making up 86% of the allocation. This concentration in large-cap US equities suggests a focus on stability and growth, but it limits diversification. Other holdings include small-cap, dividend, real estate, and international ETFs, though these make up a small fraction. Compared to a balanced portfolio, which typically includes a mix of equities, bonds, and international stocks, this portfolio is skewed towards US equities. Diversifying further could help manage risk and potentially enhance returns by spreading exposure across different asset types and geographies.

Growth Info

With a historical CAGR of 13.63%, the portfolio has delivered strong returns, outperforming many traditional benchmarks. However, the max drawdown of -34.45% indicates significant volatility during downturns. This highlights the risk of a concentrated equity portfolio, especially during market corrections. While past performance is no guarantee of future results, understanding these trends can help in setting realistic expectations. Consider diversifying further to mitigate potential drawdowns, perhaps by incorporating more fixed-income assets or international equities for a smoother performance trajectory.

Projection Info

The Monte Carlo simulation, with 1,000 scenarios, projects an annualized return of 10.37%. It uses historical data to estimate future outcomes, showing a 5th percentile return of 2.47% and a 67th percentile return of 356.06%. While these projections offer insight into possible future performance, they are not guarantees. The wide range of outcomes underscores the uncertainty inherent in investing. To potentially improve future returns, consider adjusting the portfolio's asset allocation, particularly by increasing exposure to less correlated assets, which can provide a cushion during market volatility.

Asset classes Info

  • Stocks
    98%
  • Real Estate
    2%

The portfolio is predominantly composed of equities, accounting for over 98% of the allocation, with a small portion in real estate. This high equity concentration indicates a growth-oriented strategy but lacks the diversification typically achieved by including bonds or alternative investments. Compared to a more diversified portfolio, this one is more susceptible to equity market fluctuations. To enhance diversification, consider incorporating fixed-income securities or commodities, which can help balance risk and provide stability during equity market downturns.

Sectors Info

  • Technology
    30%
  • Financials
    13%
  • Health Care
    11%
  • Consumer Discretionary
    10%
  • Industrials
    8%
  • Telecommunications
    8%
  • Consumer Staples
    6%
  • Real Estate
    4%
  • Energy
    4%
  • Utilities
    3%
  • Basic Materials
    2%

The sectoral allocation shows a significant concentration in technology, at 30%, followed by financial services and healthcare. This mirrors the S&P 500's sector weights, which is common for US-centric portfolios. While tech-heavy allocations can drive growth, they may also increase volatility, especially in rising interest rate environments. To balance this, consider redistributing some investments into underrepresented sectors, like utilities or consumer staples, which often provide stability and income during market turbulence.

Regions Info

  • North America
    99%
  • Europe Developed
    1%

The portfolio's geographic allocation is overwhelmingly focused on North America, with 98.7% exposure. This concentration limits the benefits of global diversification, such as reduced volatility and access to growth in emerging markets. While the US market has been a strong performer, diversifying into other regions could provide new opportunities and reduce country-specific risks. Consider increasing allocations to Europe, Asia, or emerging markets to capture diverse economic cycles and growth prospects.

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 be optimized using the Efficient Frontier to achieve a better risk-return balance. This involves adjusting the existing asset allocation to maximize returns for a given level of risk. By redistributing weights among current holdings, particularly by increasing exposure to less correlated assets, the portfolio could potentially achieve a more efficient risk-return profile. This approach focuses on optimizing the current asset mix without necessarily adding new assets, ensuring the portfolio aligns with the investor's risk tolerance and return expectations.

Dividends Info

  • Schwab U.S. Dividend Equity ETF 3.60%
  • Vanguard Small-Cap Index Fund ETF Shares 1.30%
  • Vanguard FTSE All-World ex-US Index Fund ETF Shares 1.60%
  • Vanguard Real Estate Index Fund ETF Shares 3.90%
  • Vanguard S&P 500 ETF 1.20%
  • Weighted yield (per year) 1.39%

The portfolio's dividend yield stands at 1.39%, with the Schwab U.S. Dividend Equity ETF providing the highest yield at 3.6%. While dividends can offer a steady income stream, the overall yield is modest due to the heavy weighting in growth-oriented large-cap equities. For investors seeking higher income, reallocating towards higher-yielding sectors or dividend-focused funds could be beneficial. Dividends can play a crucial role in total returns, especially in low-growth environments, by providing consistent cash flow.

Ongoing product costs Info

  • Schwab U.S. Dividend Equity ETF 0.06%
  • Vanguard Small-Cap Index Fund ETF Shares 0.05%
  • Vanguard FTSE All-World ex-US Index Fund ETF Shares 0.07%
  • Vanguard Real Estate Index Fund ETF Shares 0.12%
  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.03%

The portfolio benefits from impressively low costs, with a total TER of 0.03%. This aligns with best practices for minimizing investment expenses, which can significantly impact long-term returns. Low costs allow more of the portfolio's returns to compound over time, enhancing wealth accumulation. Maintaining this cost efficiency is crucial, but continually reviewing the expense ratios of all holdings ensures they remain competitive. Consider evaluating other potential low-cost funds to replace any higher-fee assets if they arise.

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