A growth-focused portfolio with high US exposure and low diversification potential

Report created on Dec 7, 2024

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

This portfolio is heavily weighted towards US-based equity ETFs, with the Vanguard S&P 500 ETF and Vanguard Total Stock Market Index Fund ETF Shares making up over 75% of the total allocation. The Schwab U.S. Dividend Equity ETF and Avantis® U.S. Small Cap Value ETF provide additional exposure to dividend-paying and small-cap value stocks. This composition suggests a strong focus on growth within the US market. A concentrated allocation like this can lead to higher volatility, but it also offers the potential for significant returns if the US market performs well. To mitigate risks, consider adding non-US assets or other asset classes such as bonds or real estate.

Growth Info

Historically, the portfolio has shown impressive performance with a compound annual growth rate (CAGR) of 17.05%. However, it also experienced a maximum drawdown of 35.08%, indicating significant volatility. These figures suggest that while the portfolio has achieved strong growth, it has also been subject to substantial fluctuations. Historical performance is a useful indicator, but it is not a guarantee of future results. Investors should be prepared for potential downturns and consider their risk tolerance when evaluating these numbers. Diversifying further could help reduce the impact of such drawdowns in the future.

Projection Info

Using Monte Carlo simulations, this portfolio has a wide range of potential future outcomes. With 1,000 simulations, the median (50th percentile) projected return is 712.15%, while the 5th percentile is 86.8%. This method uses historical data to project possible future scenarios, but it cannot predict exact outcomes. The high variance in potential returns reflects the portfolio's risk profile. Investors should be aware that while the simulations suggest a high probability of positive returns, the actual results could vary significantly. Regularly reviewing and adjusting the portfolio can help align it with changing market conditions and personal goals.

Asset classes Info

  • Stocks
    100%

The portfolio is almost entirely composed of stocks, with a minuscule allocation to cash. This high concentration in equities suggests a focus on capital appreciation rather than income generation or capital preservation. While stocks have historically provided higher returns over the long term, they also come with increased risk and volatility. Investors should consider their risk tolerance and investment horizon when maintaining such a concentrated equity position. Introducing other asset classes, like bonds or commodities, could provide a buffer against market downturns and add stability to the portfolio.

Sectors Info

  • Technology
    26%
  • Financials
    16%
  • Health Care
    11%
  • Consumer Discretionary
    11%
  • Industrials
    10%
  • Telecommunications
    7%
  • Consumer Staples
    7%
  • Energy
    6%
  • Basic Materials
    2%
  • Utilities
    2%
  • Real Estate
    2%

The sector allocation shows a significant concentration in technology, which accounts for over 26% of the portfolio. Other notable sectors include financial services, healthcare, and consumer cyclicals. This concentration in technology can drive growth but also introduces sector-specific risks, such as regulatory changes or technological disruptions. A more balanced sector allocation could help mitigate these risks and provide more stable returns. Investors might consider diversifying into underrepresented sectors like utilities or real estate to reduce reliance on a few high-growth areas.

Regions Info

  • North America
    99%

The portfolio is overwhelmingly concentrated in North America, with over 99% of assets allocated to this region. This geographic focus exposes the portfolio to region-specific risks, such as economic downturns or political instability in the US. While the US market has been a strong performer historically, diversification into other regions could reduce risk and capture growth opportunities in emerging markets. Adding more international exposure can help balance the portfolio and provide a hedge against US-centric risks.

Redundant positions Info

  • Vanguard S&P 500 ETF
    Vanguard Total Stock Market Index Fund ETF Shares
    High correlation

The portfolio contains highly correlated assets, particularly between the Vanguard S&P 500 ETF and the Vanguard Total Stock Market Index Fund ETF Shares. High correlation means these assets tend to move in the same direction, which can amplify portfolio volatility. Reducing correlation by introducing assets with different risk profiles or market behaviors can enhance diversification. Consider replacing or supplementing some of these holdings with less correlated investments to achieve a more balanced risk-return profile.

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 to maximize returns for a given level of risk. By adjusting the allocation among existing assets, it's possible to achieve a better risk-return ratio. However, optimization doesn't necessarily mean adding new assets; it involves finding the right balance among current holdings. Consider reducing the weight of highly correlated assets and increasing exposure to those that offer diversification benefits. This approach can help improve the portfolio's overall efficiency and align it more closely with your investment goals.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.50%
  • Schwab U.S. Dividend Equity ETF 2.50%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.20%
  • Weighted yield (per year) 1.44%

With a total dividend yield of 1.44%, the portfolio provides moderate income through dividends. The Schwab U.S. Dividend Equity ETF contributes the highest yield at 2.5%, while the other ETFs offer lower yields. Dividends can be an important component of total returns, especially during periods of market volatility. For investors seeking higher income, increasing exposure to dividend-focused assets could be beneficial. However, it's essential to balance this with growth objectives to maintain the portfolio's overall strategy.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Weighted costs total (per year) 0.05%

The portfolio's total expense ratio (TER) is relatively low at 0.05%, thanks to the inclusion of low-cost Vanguard ETFs. This cost efficiency is advantageous as it helps maximize net returns over time. Lower costs mean more of your investment gains stay in your pocket rather than going towards fees. While the Avantis® U.S. Small Cap Value ETF has a slightly higher expense ratio, its inclusion should be justified by its potential returns. Regularly reviewing and comparing fund costs can ensure you're getting the best value for your investments.

What next?

Ready to invest in this portfolio?

Select a broker that fits your needs and watch for low fees to maximize your returns.

Select broker

Create your own report?

Analyze your portfolio

Join our community!

Join Discord

The information provided on this platform is for informational purposes only and should not be considered as financial or investment advice. Insightfolio does not provide investment advice, personalized recommendations, or guidance regarding the purchase, holding, or sale of financial assets. The tools and content are intended for educational purposes only and are not tailored to individual circumstances, financial needs, or objectives.

Insightfolio assumes no liability for the accuracy, completeness, or reliability of the information presented. Users are solely responsible for verifying the information and making independent decisions based on their own research and careful consideration. Use of the platform should not replace consultation with qualified financial professionals.

Investments involve risks. Users should be aware that the value of investments may fluctuate and that past performance is not an indicator of future results. Investment decisions should be based on personal financial goals, risk tolerance, and independent evaluation of relevant information.

Insightfolio does not endorse or guarantee the suitability of any particular financial product, security, or strategy. Any projections, forecasts, or hypothetical scenarios presented on the platform are for illustrative purposes only and are not guarantees of future outcomes.

By accessing the services, information, or content offered by Insightfolio, users acknowledge and agree to these terms of the disclaimer. If you do not agree to these terms, please do not use our platform.

Instrument logos provided by Elbstream.

Help us improve Insightfolio

Your feedback makes a difference! Share your thoughts in our quick survey. Take the survey