A growth-oriented US-focused portfolio with high concentration in technology and large-cap stocks

Report created on Jan 25, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

This portfolio is heavily weighted in ETFs, with a strong emphasis on large-cap US stocks, particularly through the iShares Core S&P 500 ETF and Schwab U.S. Dividend Equity ETF. The concentration in ETFs, especially those tracking major indices, indicates a preference for passive investment strategies. While this provides broad market exposure, it may lack diversification across different asset classes. To enhance diversification, consider incorporating other asset types such as bonds or international equities, which can mitigate risks associated with market volatility and provide more balanced growth.

Growth Info

The portfolio's historical performance is impressive, with a CAGR of 15.92%, significantly outperforming many benchmarks. However, it also experienced a maximum drawdown of -24.93%, indicating vulnerability during market downturns. This performance highlights the portfolio's potential for high returns but also underscores the associated risks. Historical performance is not a guarantee of future results, and market conditions can change. To manage risk, consider strategies such as rebalancing or adding defensive assets to protect against future downturns while maintaining growth potential.

Projection Info

The forward-looking Monte Carlo simulation suggests a broad range of potential outcomes, with the median scenario projecting a 595.3% increase. This method uses historical data to simulate future performance, providing a probabilistic view rather than a prediction. While the simulations indicate a high likelihood of positive returns, it’s important to note that these projections are not guarantees. To prepare for various market conditions, consider stress-testing the portfolio under different scenarios and adjusting allocations to ensure alignment with long-term goals and risk tolerance.

Asset classes Info

  • Stocks
    100%

The portfolio is entirely invested in stocks, which can lead to high volatility and risk due to lack of diversification. This single asset class focus may result in significant fluctuations during market downturns. Diversification across multiple asset classes, such as bonds or real estate, can help reduce overall portfolio risk and provide more stable returns. Consider gradually introducing other asset classes to balance the portfolio and enhance its ability to weather different market environments while still pursuing growth opportunities.

Sectors Info

  • Technology
    40%
  • Financials
    11%
  • Consumer Discretionary
    10%
  • Health Care
    9%
  • Telecommunications
    8%
  • Industrials
    7%
  • Consumer Staples
    7%
  • Energy
    5%
  • Basic Materials
    1%
  • Utilities
    1%
  • Real Estate
    1%

With a 40% allocation to technology, the portfolio is significantly overweight in this sector compared to typical benchmarks. This concentration can lead to higher volatility, especially during periods of economic uncertainty or interest rate changes that impact tech stocks. While tech has driven substantial growth, consider diversifying into other sectors like consumer goods or healthcare to reduce sector-specific risk. A more balanced sector allocation can provide stability and capture growth opportunities across different economic cycles.

Regions Info

  • North America
    99%
  • Europe Developed
    1%

The portfolio is overwhelmingly concentrated in North American assets, at 99%, which limits exposure to international markets. This geographic concentration can expose the portfolio to regional economic risks and miss out on global growth opportunities. Diversifying geographically by adding international equities, particularly from emerging markets, can enhance diversification and provide access to different economic growth drivers. This approach can help mitigate regional risks and capture potential gains from global market trends.

Market capitalization Info

  • Large-cap
    40%
  • Mega-cap
    36%
  • Mid-cap
    18%
  • Small-cap
    4%
  • Micro-cap
    2%

The portfolio leans heavily towards large-cap stocks, with 76% in big and mega-cap companies. This focus provides stability and lower volatility but may limit exposure to the high growth potential of smaller companies. Including more mid-cap and small-cap stocks can enhance diversification and offer opportunities for higher returns, albeit with increased risk. A balanced market capitalization strategy can help capture growth across different company sizes and economic environments.

Redundant positions Info

  • Vanguard Growth Index Fund ETF Shares
    Vanguard Information Technology Index Fund ETF Shares
    Invesco NASDAQ 100 ETF
    High correlation

The portfolio includes highly correlated assets, particularly among tech-focused ETFs like Vanguard Growth, Vanguard Information Technology, and Invesco NASDAQ 100. High correlation means these assets tend to move together, reducing diversification benefits. During market downturns, this could lead to amplified losses. To improve diversification, consider reducing exposure to overlapping assets and adding uncorrelated investments. This strategy can help manage risk and enhance the portfolio's resilience against market volatility.

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 can potentially be optimized using the Efficient Frontier, which aims for the best possible risk-return ratio. By adjusting allocations among current assets, you can achieve a more efficient portfolio with a higher expected return of 3.85% at a lower risk level. This optimization focuses on maximizing returns for a given level of risk, not necessarily diversification. Consider rebalancing to align with the Efficient Frontier, ensuring that the portfolio meets your risk tolerance and investment objectives.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.60%
  • iShares Core S&P 500 ETF 1.30%
  • Invesco NASDAQ 100 ETF 0.60%
  • Schwab U.S. Dividend Equity ETF 3.50%
  • Schwab Value Advantage Money Fund 4.40%
  • Vanguard Information Technology Index Fund ETF Shares 0.60%
  • Vanguard Growth Index Fund ETF Shares 0.40%
  • Weighted yield (per year) 1.65%

The portfolio's total dividend yield is 1.65%, with the Schwab U.S. Dividend Equity ETF contributing significantly at 3.50%. Dividends provide a steady income stream and can help cushion against market volatility. For investors seeking income, maintaining or increasing exposure to dividend-paying assets can be beneficial. However, ensure that the focus on dividends aligns with overall investment goals. Balancing growth and income strategies can optimize returns while managing risk.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • iShares Core S&P 500 ETF 0.03%
  • Invesco NASDAQ 100 ETF 0.15%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • Vanguard Information Technology Index Fund ETF Shares 0.10%
  • Vanguard Growth Index Fund ETF Shares 0.04%
  • Weighted costs total (per year) 0.07%

The portfolio's total expense ratio (TER) is impressively low at 0.07%, which supports better long-term performance by minimizing costs. Low fees mean more of your returns stay invested, compounding over time. This efficient cost structure aligns with best practices, ensuring that expenses do not erode gains. Regularly reviewing and optimizing costs can further enhance returns. Consider maintaining this low-cost approach while ensuring that any new investments also adhere to cost-efficiency standards.

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