A growth-focused portfolio with high US stock concentration and low geographic diversification

Report created on Dec 18, 2024

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 ETFs, particularly the Vanguard S&P 500 ETF and the iShares Core S&P Total U.S. Stock Market ETF, which together account for over 77% of the portfolio. Additionally, there is a notable allocation to the Health Care Select Sector SPDR Fund. This composition suggests a strong focus on broad market exposure with a significant tilt towards healthcare. While the ETFs provide diversification within the U.S. market, the overall portfolio lacks diversity due to its heavy reliance on a few funds. To enhance diversification, consider incorporating assets from different asset classes, such as bonds or international equities, which could help mitigate risks associated with market volatility.

Growth Info

Historically, the portfolio has shown a strong compound annual growth rate (CAGR) of 22.06%, indicating robust past performance. However, it also experienced a maximum drawdown of -22.91%, highlighting its vulnerability during market downturns. This pattern reflects the high-risk, high-reward nature of growth-focused investments. While past performance can provide insights, it's important to remember that it does not guarantee future results. Investors should be cautious about relying solely on historical returns and consider diversifying their investments to manage potential future risks.

Projection Info

Monte Carlo simulations, which use historical data to project future outcomes, reveal a concerning outlook for this portfolio. With only three simulations showing positive returns, the majority indicate potential losses. This suggests that the portfolio's current composition may not be well-suited for future market conditions. While simulations provide valuable insights, they have limitations, as they rely on past data and assumptions. Investors should use these projections as one of many tools in their decision-making process and consider adjusting their asset allocation to improve potential outcomes.

Asset classes Info

  • Stocks
    100%

The portfolio is overwhelmingly allocated to stocks, with nearly 100% in equity investments and a negligible amount in cash. This heavy stock allocation aligns with a growth investment strategy but increases exposure to market volatility. While equities offer potential for high returns, they also carry significant risk, particularly in turbulent markets. To mitigate this risk, consider diversifying into other asset classes, such as bonds or real estate, which can provide stability and income during market downturns, thereby balancing the overall risk-return profile.

Sectors Info

  • Technology
    28%
  • Health Care
    26%
  • Financials
    10%
  • Consumer Discretionary
    8%
  • Telecommunications
    7%
  • Industrials
    6%
  • Consumer Staples
    4%
  • Real Estate
    4%
  • Energy
    3%
  • Utilities
    2%
  • Basic Materials
    2%

Sector analysis reveals a significant concentration in technology and healthcare, together comprising over 54% of the portfolio. While these sectors have shown strong growth, their high weighting increases the portfolio's sensitivity to sector-specific risks. Diversifying into other sectors, such as consumer staples or utilities, could reduce this concentration risk and provide more balanced exposure. A well-diversified sector allocation can help cushion the portfolio against downturns in any single sector and enhance overall stability.

Regions Info

  • North America
    99%

Geographically, the portfolio is almost entirely focused on North America, with over 99% exposure. This lack of geographic diversification limits the portfolio's ability to benefit from growth opportunities in other regions and increases vulnerability to North American market fluctuations. Expanding geographic exposure by including international equities from developed and emerging markets can enhance diversification and reduce region-specific risks. A more globally diversified portfolio can take advantage of different economic cycles and growth prospects worldwide.

Redundant positions Info

  • iShares Core S&P Total U.S. Stock Market ETF
    Vanguard S&P 500 ETF
    High correlation

The portfolio exhibits high correlation between its major ETFs, particularly the Vanguard S&P 500 ETF and the iShares Core S&P Total U.S. Stock Market ETF. High correlation means these assets tend to move in the same direction, reducing diversification benefits. To improve risk management, consider replacing or complementing these ETFs with assets that have lower correlation, such as international stocks or other asset classes. Diversifying across less correlated assets can help smooth returns and reduce overall portfolio risk.

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.

Portfolio optimization using the Efficient Frontier suggests that the current portfolio can achieve a higher expected return of 22.30% with the same risk level by adjusting asset allocations. This involves reallocating assets to achieve the best possible risk-return ratio. However, optimization focuses on current assets and their allocations, not diversification. To enhance efficiency, consider reducing highly correlated assets and exploring other investment opportunities. Regularly reviewing and rebalancing the portfolio can help maintain its optimal risk-return profile over time.

Dividends Info

  • iShares Core S&P Total U.S. Stock Market ETF 1.20%
  • Vanguard S&P 500 ETF 1.20%
  • Health Care Select Sector SPDR® Fund 1.20%
  • Weighted yield (per year) 1.14%

The portfolio's dividend yield stands at 1.14%, reflecting moderate income generation. While dividends provide a steady income stream, the current yield is relatively low, especially for investors seeking income. To enhance dividend income, consider incorporating high-yield dividend stocks or ETFs into the portfolio. However, it's important to balance the pursuit of higher yields with the potential risks associated with dividend-paying stocks, such as interest rate sensitivity and company-specific risks.

Ongoing product costs Info

  • iShares Core S&P Total U.S. Stock Market ETF 0.03%
  • Vanguard S&P 500 ETF 0.03%
  • Health Care Select Sector SPDR® Fund 0.09%
  • Weighted costs total (per year) 0.04%

The portfolio's total expense ratio (TER) is low at 0.04%, indicating cost efficiency. Low costs are crucial for maximizing long-term returns, as they leave more of the portfolio's gains in the investor's pocket. While the current costs are favorable, it's essential to remain vigilant about fees, especially when considering new investments. Opt for low-cost funds and ETFs to maintain cost efficiency and continuously seek opportunities to reduce expenses without sacrificing portfolio quality.

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