A growth-focused portfolio with high risk and limited geographic diversification

Report created on Dec 30, 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 concentrated in equities, with a significant 61.19% allocation to the Schwab S&P 500 Index Fund. NVIDIA Corporation represents 17.7%, indicating a strong preference for large-cap tech stocks. The remaining allocations include 11.55% in Avantis® U.S. Small Cap Value ETF and 9.56% in First Trust NASDAQ Cybersecurity ETF. This composition suggests a growth-oriented strategy but lacks diversification compared to typical balanced portfolios that include bonds or international equities. To enhance diversification, consider incorporating different asset classes like bonds or international funds to balance the risk and potentially stabilize returns.

Growth Info

Historically, the portfolio has delivered a robust CAGR of 28.56%, reflecting strong past performance. However, it has also experienced a significant maximum drawdown of -43.73%, highlighting the potential volatility associated with its concentrated equity exposure. The performance is indicative of a high-growth strategy, which can lead to substantial gains but also carries considerable risk. Investors should be aware that past performance doesn't guarantee future results, and it's crucial to balance the pursuit of high returns with risk management.

Projection Info

The Monte Carlo simulation, which uses historical data to forecast potential outcomes, suggests a wide range of future possibilities. The portfolio shows a 5th percentile end value of 444.73% and a 67th percentile of 10,888.48%, indicating the potential for significant growth but also substantial risk. While the simulation provides insight into possible outcomes, it's important to remember that these are projections based on past data and not guarantees. Diversifying the portfolio could help mitigate risks and provide more stable growth over time.

Asset classes Info

  • Stocks
    100%

The portfolio is almost entirely invested in stocks, with a negligible cash position of 0.24%. This heavy equity focus aligns with a growth strategy but lacks the diversification benefits of including other asset classes like bonds or real estate. Diversifying into different asset classes can reduce portfolio volatility and provide a buffer during market downturns. Consider adding fixed income or alternative investments to enhance stability and potentially improve risk-adjusted returns.

Sectors Info

  • Technology
    48%
  • Financials
    11%
  • Industrials
    7%
  • Health Care
    7%
  • Consumer Discretionary
    6%
  • Telecommunications
    6%
  • Consumer Staples
    4%
  • Energy
    4%
  • Basic Materials
    2%
  • Consumer Discretionary
    2%
  • Utilities
    2%
  • Real Estate
    1%

The portfolio is heavily weighted towards technology, comprising 47.62% of the total allocation. Other sectors like Financial Services and Industrials have much smaller representations. This tech-heavy concentration could lead to higher volatility, especially during periods of economic uncertainty or interest rate changes. To mitigate sector-specific risks, consider diversifying into other sectors like Consumer Defensive or Healthcare, which may offer more stability and less correlation to technology.

Regions Info

  • North America
    98%
  • Asia Emerging
    1%
  • Europe Developed
    1%

Geographically, the portfolio is overwhelmingly concentrated in North America, accounting for 97.84% of the allocation. This lack of international exposure limits the benefits of geographic diversification, which can reduce risk by spreading investments across different economic regions. To enhance diversification, consider adding exposure to emerging and developed markets outside North America. This can help buffer against regional economic downturns and capture growth opportunities globally.

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's risk-return profile may be optimized using the Efficient Frontier, which seeks to achieve the best possible return for a given level of risk. Currently, the portfolio is heavily skewed towards equities, which increases risk. By adjusting the asset allocation to include less volatile investments, such as bonds or diversified international equities, the portfolio can potentially achieve a more favorable risk-return balance. This optimization focuses on maximizing returns while keeping risk within acceptable limits.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.60%
  • First Trust NASDAQ Cybersecurity ETF 0.20%
  • Schwab S&P 500 Index Fund 1.20%
  • Weighted yield (per year) 0.94%

The portfolio's dividend yield is relatively low at 0.94%, indicating a focus on growth over income. While dividends can provide a steady income stream and contribute to total returns, the current yield reflects the portfolio's emphasis on capital appreciation. For investors seeking income, increasing allocations to higher-yielding assets or dividend-focused funds could enhance the income component without significantly altering the growth profile.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • First Trust NASDAQ Cybersecurity ETF 0.59%
  • Schwab S&P 500 Index Fund 0.02%
  • Weighted costs total (per year) 0.10%

The portfolio's total expense ratio (TER) is impressively low at 0.1%, suggesting cost-efficient management. Low costs are advantageous as they help enhance net returns over the long term. The Schwab S&P 500 Index Fund contributes significantly to this low cost with its minimal expense ratio of 0.02%. Maintaining a focus on cost-effective funds can improve overall performance, so continue to monitor and evaluate expenses to ensure they remain competitive.

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