A growth-focused portfolio with high U.S. concentration and limited diversification

Report created on Jan 23, 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 weighted towards U.S. large-cap growth stocks, with 40% in Schwab U.S. Large-Cap Growth ETF and 30% in iShares Core S&P 500 ETF. This composition indicates a strong focus on growth-oriented investments, but also suggests limited diversification due to the high concentration in large-cap equities. Compared to a benchmark with a more balanced allocation, this portfolio may experience higher volatility. To enhance diversification, consider incorporating different asset classes or regions to balance growth with stability.

Growth Info

Historically, the portfolio has performed well with a Compound Annual Growth Rate (CAGR) of 16.93%. This suggests strong past returns, but it is important to note that past performance does not guarantee future results. The portfolio's maximum drawdown of -34.30% highlights its potential volatility. Comparing this performance to a benchmark like the S&P 500 can provide additional context. To mitigate future drawdowns, consider diversifying across asset classes and sectors.

Projection Info

Monte Carlo simulations, which use historical data to project future outcomes, indicate a wide range of potential returns for this portfolio. The median projection shows a substantial growth potential, but the 5th percentile indicates a significant risk of lower returns. While these simulations provide insights, they rely on historical data and cannot predict future market conditions. To optimize future performance, consider adjusting the asset allocation to manage risk while aiming for desired returns.

Asset classes Info

  • Stocks
    100%

The portfolio is entirely composed of stocks, lacking exposure to other asset classes such as bonds or real estate. This singular focus on equities can lead to higher volatility, especially during market downturns. Compared to a balanced benchmark, this allocation may not provide sufficient risk mitigation. To improve diversification, consider including other asset classes that can offer stability and income, reducing the portfolio's overall risk.

Sectors Info

  • Technology
    35%
  • Consumer Discretionary
    14%
  • Health Care
    12%
  • Telecommunications
    10%
  • Financials
    8%
  • Energy
    6%
  • Industrials
    6%
  • Consumer Staples
    5%
  • Basic Materials
    2%
  • Real Estate
    2%
  • Utilities
    1%

With 35% of the portfolio in technology, there is a notable concentration in this sector, which may lead to increased volatility, particularly during interest rate hikes. Other sectors like healthcare and consumer cyclicals provide some diversification, but the portfolio remains heavily tech-focused compared to broader benchmarks. To balance risk, consider diversifying into sectors that may perform differently under varying economic conditions.

Regions Info

  • North America
    100%

The portfolio is entirely invested in North American equities, with no exposure to international markets. This geographic concentration can limit diversification benefits and increase vulnerability to regional economic downturns. Compared to a global benchmark, this portfolio may miss opportunities in emerging markets. To enhance diversification, consider adding international equities to capture growth potential in other regions.

Market capitalization Info

  • Mega-cap
    41%
  • Large-cap
    22%
  • Mid-cap
    18%
  • Small-cap
    13%
  • Micro-cap
    5%

The portfolio is heavily weighted towards mega-cap stocks, comprising 41% of the allocation. While these companies offer stability and liquidity, the lack of exposure to smaller-cap stocks may limit growth potential. Compared to a benchmark that includes a broader range of market capitalizations, this portfolio may benefit from diversification. Consider increasing exposure to small and mid-cap stocks to capture potential growth opportunities.

Redundant positions Info

  • Schwab U.S. Large-Cap Growth ETF
    iShares Core S&P 500 ETF
    High correlation

The Schwab U.S. Large-Cap Growth ETF and iShares Core S&P 500 ETF are highly correlated, meaning they tend to move in tandem. This limits the portfolio's diversification benefits, especially during market downturns. While correlation is not inherently negative, it can increase risk if the assets react similarly to market events. To enhance diversification, consider including assets with lower correlation to each other.

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 can be optimized using the Efficient Frontier, which balances risk and return for the given assets. However, the presence of highly correlated assets suggests limited diversification benefits. By adjusting the asset allocation, the portfolio can achieve a better risk-return ratio. Consider reallocating to include less correlated assets, enhancing the portfolio's efficiency and potential for optimized returns.

Dividends Info

  • Pacer US Cash Cows 100 ETF 1.40%
  • iShares Core S&P 500 ETF 1.30%
  • iShares Russell 2000 ETF 1.10%
  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • Weighted yield (per year) 0.94%

The portfolio's dividend yield is relatively low at 0.94%, reflecting its growth orientation. While dividends can provide a steady income stream, this portfolio prioritizes capital appreciation over income generation. For investors seeking higher income, consider reallocating to include higher-dividend-paying assets. However, for a growth-focused strategy, maintaining current allocations may align with long-term goals.

Ongoing product costs Info

  • Pacer US Cash Cows 100 ETF 0.49%
  • iShares Core S&P 500 ETF 0.03%
  • iShares Russell 2000 ETF 0.19%
  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • Weighted costs total (per year) 0.14%

The total expense ratio (TER) for the portfolio is 0.14%, which is commendably low. This cost efficiency supports better long-term performance by minimizing fees that can erode returns. Compared to other investment options, maintaining low costs is a strategic advantage. Continue monitoring expense ratios and consider reallocating to lower-cost options if available, ensuring that cost efficiency remains a priority.

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