A concentrated growth portfolio with a strong focus on large-cap U.S. equities

Report created on Jan 22, 2025

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 two major ETFs: Vanguard S&P 500 ETF and Invesco NASDAQ 100 ETF, accounting for over 90% of the holdings. This composition reflects a strong bias towards large-cap U.S. equities, limiting diversification across asset classes. While this focus can drive growth, it also increases exposure to market volatility. A more balanced allocation could potentially reduce risk and enhance diversification, aligning better with benchmark standards. Consider incorporating additional asset classes such as bonds or international equities to broaden diversification and potentially stabilize returns during market fluctuations.

Growth Info

Historically, the portfolio has demonstrated impressive growth with a Compound Annual Growth Rate (CAGR) of 21.35%. However, the maximum drawdown of -29.19% highlights the potential for significant losses during market downturns. This volatility underscores the importance of diversification to mitigate risk. Comparing this performance to benchmarks, such as the S&P 500, can provide context on relative performance. It is crucial to remember that past performance does not guarantee future results. Diversifying holdings may help cushion against future downturns and smooth out returns over time.

Projection Info

Forward projections using Monte Carlo simulations show a wide range of potential outcomes, with a median return of 804.3%. This method uses historical data to model future performance, but it's essential to recognize its limitations. The high variability in outcomes, from a potential loss of -87.8% to gains of 2,814%, indicates substantial risk. While the simulations suggest a high probability of positive returns, the potential for significant losses remains. Diversifying the portfolio could potentially narrow this range, offering more stable and predictable returns.

Asset classes Info

  • Stocks
    100%

The portfolio's exclusive focus on stocks, with 100% in equities, limits diversification benefits typically gained from including other asset classes like bonds or real estate. This singular asset class exposure can lead to heightened volatility, especially during market downturns. Compared to a more balanced benchmark, this allocation is heavily skewed. Introducing other asset classes could enhance diversification, potentially reducing risk and providing a buffer during market corrections. Consider exploring alternative investments to achieve a more balanced risk-return profile.

Sectors Info

  • Technology
    47%
  • Consumer Discretionary
    11%
  • Telecommunications
    11%
  • Health Care
    7%
  • Financials
    7%
  • Industrials
    5%
  • Consumer Staples
    5%
  • Energy
    2%
  • Utilities
    2%
  • Basic Materials
    1%
  • Real Estate
    1%

Sector allocation reveals a heavy concentration in technology, comprising 47% of the portfolio. While this can drive growth, it also exposes the portfolio to sector-specific risks, such as regulatory changes or market corrections. This allocation is significantly above common benchmarks, which typically offer broader sector diversification. Balancing the sector distribution to include more defensive sectors like utilities or consumer staples could help mitigate risk. By spreading investments across diverse sectors, the portfolio could achieve more stable growth and reduce vulnerability to sector-specific downturns.

Regions Info

  • North America
    99%
  • Europe Developed
    1%

The geographic allocation is overwhelmingly concentrated in North America, with 99% exposure. This limits the benefits of global diversification, which can help reduce risk by spreading investments across different economic regions. Compared to benchmarks with more international exposure, this portfolio is under-diversified geographically. Expanding into developed markets in Europe or emerging markets in Asia could enhance diversification and provide opportunities for growth in regions with different economic cycles. This broader exposure could help mitigate risks associated with regional economic downturns.

Market capitalization Info

  • Mega-cap
    46%
  • Large-cap
    32%
  • Mid-cap
    22%

The portfolio is primarily invested in large-cap companies, with 78% in mega and big caps. This focus on established companies can provide stability but may limit growth potential typically found in mid and small-cap stocks. Compared to a more diversified benchmark, this allocation is heavily weighted towards large-cap stocks. Introducing more mid and small-cap stocks could enhance growth opportunities and improve diversification. This adjustment could provide a better balance between stability and growth, potentially improving the overall risk-return profile of the portfolio.

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 current portfolio composition shows potential for optimization using the Efficient Frontier, which seeks the best possible risk-return ratio. By adjusting the allocation among existing assets, the portfolio could achieve a more efficient balance. This does not necessarily mean adding new assets but rather reallocating within the current holdings to improve the risk-return profile. Consider exploring different allocation strategies to find the optimal balance that aligns with your risk tolerance and investment goals. This approach can enhance returns while managing risk effectively.

Dividends Info

  • Invesco NASDAQ 100 ETF 0.60%
  • Vanguard S&P 500 ETF 1.20%
  • Weighted yield (per year) 0.84%

With a total dividend yield of 0.84%, the portfolio provides some income, but it is relatively low compared to income-focused investments. Dividends can offer a steady income stream, which can be particularly valuable during market downturns. The current yield reflects the growth-oriented nature of the portfolio, with a focus on capital appreciation rather than income. Consider balancing growth with income by incorporating higher-yielding assets. This can enhance the portfolio's overall return and provide a cushion during periods of market volatility.

Ongoing product costs Info

  • Invesco NASDAQ 100 ETF 0.15%
  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.08%

The portfolio benefits from low costs, with a Total Expense Ratio (TER) of 0.08%. This is favorable compared to industry averages, supporting better long-term performance by minimizing costs that erode returns. Keeping costs low is crucial for maximizing net returns, especially over long investment horizons. This aspect of the portfolio is well-aligned with best practices. Continue to monitor and manage costs to ensure they remain competitive. Low costs provide a strong foundation for long-term investment success, enhancing the portfolio's overall efficiency.

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