Growth-focused portfolio with high concentration in large-cap US equities and limited diversification

Report created on Dec 14, 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 the Vanguard S&P 500 ETF, which makes up 80% of the total allocation. The remaining 20% is split between the Avantis U.S. Small Cap Value ETF and the Vanguard S&P Mid-Cap 400 Growth Index Fund ETF Shares, each holding 10%. This composition indicates a strong preference for large-cap U.S. equities, with a minor allocation to small-cap and mid-cap stocks. While this can lead to significant growth potential, it also means the portfolio lacks diversification across different asset classes, making it more susceptible to market volatility.

Growth Info

Historically, the portfolio has demonstrated strong performance, with a compound annual growth rate (CAGR) of 17.27%. However, it has also experienced a maximum drawdown of -35.66%, highlighting its vulnerability during market downturns. This historical performance suggests that while the portfolio can offer substantial returns, it is also prone to significant fluctuations. Investors should be aware of the limitations of relying solely on past performance, as it does not guarantee future results.

Projection Info

The Monte Carlo simulation, which uses historical data to project potential future outcomes, indicates a wide range of possible returns. With 1,000 simulations, the portfolio shows a median return of 697.4% and an annualized return of 19.03%. However, the 5th percentile outcome is much lower at 48.43%, illustrating potential downside risk. While simulations offer insights into potential future performance, they are based on historical data and assumptions, and actual results may vary.

Asset classes Info

  • Stocks
    100%

The portfolio is overwhelmingly allocated to stocks, with 99.9% in equities and a negligible amount in cash. This high allocation to stocks suggests a focus on capital appreciation, but it also increases exposure to market risk. Diversifying into other asset classes, such as bonds or real estate, could help mitigate risk and provide more stable returns. A more balanced allocation can enhance the portfolio's resilience to market fluctuations.

Sectors Info

  • Technology
    28%
  • Financials
    14%
  • Consumer Discretionary
    11%
  • Industrials
    11%
  • Health Care
    10%
  • Telecommunications
    8%
  • Consumer Staples
    5%
  • Energy
    5%
  • Basic Materials
    3%
  • Real Estate
    2%
  • Utilities
    2%

This portfolio is heavily weighted towards the technology sector, which comprises 28.46% of the total allocation. Other significant sectors include financial services, consumer cyclicals, and industrials. While sector concentration can drive returns when these sectors perform well, it also increases vulnerability to sector-specific downturns. To achieve better diversification, consider redistributing some investments into underrepresented sectors like utilities or healthcare.

Regions Info

  • North America
    99%
  • Europe Developed
    1%

The portfolio is predominantly invested in North America, with 99.18% exposure, and minimal allocations to other regions. This geographic concentration exposes the portfolio to regional economic and political risks. Diversifying into international markets can provide exposure to different economic cycles and reduce reliance on the U.S. market. Consider increasing allocations to developed and emerging markets for a more balanced geographic spread.

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 Efficient Frontier suggests that the current portfolio allocation may not be fully optimized for the best risk-return ratio. By adjusting the weightings among the existing assets, it is possible to achieve a more efficient allocation. This does not necessarily mean adding new assets but rather rebalancing the current ones to maximize returns for a given level of risk. Periodic rebalancing can help maintain optimal efficiency as market conditions change.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.50%
  • Vanguard S&P Mid-Cap 400 Growth Index Fund ETF Shares 0.90%
  • Vanguard S&P 500 ETF 1.20%
  • Weighted yield (per year) 1.20%

The portfolio's dividend yield is modest at 1.2%, reflecting its focus on growth rather than income generation. While dividends can provide a steady income stream, the primary objective here appears to be capital appreciation. Investors seeking higher income might consider increasing allocations to higher-yielding assets. However, it's important to balance income needs with growth potential to ensure long-term financial goals are met.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Vanguard S&P Mid-Cap 400 Growth Index Fund ETF Shares 0.15%
  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.06%

The total expense ratio (TER) of the portfolio is 0.06%, which is relatively low, indicating cost efficiency. The Vanguard S&P 500 ETF contributes the least to costs, while the Avantis U.S. Small Cap Value ETF has the highest expense ratio. Keeping costs low is crucial for maximizing long-term returns, as high fees can erode gains over time. Regularly reviewing and optimizing for lower-cost funds can further enhance net returns.

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