Growth-focused portfolio with high concentration in US equities and low diversification

Risk profile

  • Secure
    Speculative

The risk profile, derived from past market volatility, reflects the level of risk the portfolio is exposed to. This assessment helps align your investments with your financial goals and comfort with market fluctuations.

Diversification profile

  • Focused
    Diversified

The diversification assessment evaluates the spread of investments across asset classes, regions, and sectors. This ensures a balanced mix, reducing risk and maximizing returns by not concentrating in any single area.

What type of investor this portfolio is suitable for

Growth Investors

This portfolio suits an investor with a growth-oriented profile, moderate to high risk tolerance, and a long-term investment horizon. It's designed for individuals comfortable with significant exposure to the stock market's ups and downs, primarily within the US. Such investors are likely seeking higher returns and are willing to accept the volatility associated with a heavily stock-focused, minimally diversified portfolio. This approach is best suited for those who can stay invested through market cycles without needing to liquidate assets during downturns.

Positions

  • Vanguard Total Stock Market Index Fund ETF Shares
    VTI - US9229087690
    39.00%
  • Vanguard S&P 500 ETF
    VOO - US9229083632
    34.00%
  • SPDR S&P 500 ETF Trust
    SPY - US78462F1030
    27.00%

The portfolio is heavily concentrated in US equities, with 100% of its allocation in stock ETFs, specifically within the Vanguard Total Stock Market Index Fund ETF Shares, Vanguard S&P 500 ETF, and SPDR S&P 500 ETF Trust. This composition indicates a strong focus on growth through exposure to the broad US stock market and the S&P 500 index, but it also highlights a significant lack of diversification across asset classes and geographic regions. The overlapping nature of these ETFs means the portfolio is highly exposed to the performance of the US stock market without the risk mitigation benefits that come from a more diversified asset allocation.

Growth Info

Historically, the portfolio has demonstrated a Compound Annual Growth Rate (CAGR) of 14.24%, with a maximum drawdown of -34.33%. These figures suggest that while the portfolio has achieved strong growth, it has also experienced significant volatility, as indicated by the substantial drawdown. The days that make up 90% of returns being concentrated in just 30.0 days further underscores the portfolio's exposure to high volatility and the potential for large fluctuations in value over short periods.

Projection Info

Monte Carlo simulations, which use historical data to project a range of possible future outcomes, indicate a wide variance in potential returns, with a 50th percentile outcome showing a 500.3% increase. However, it's crucial to remember that these projections are based on past performance, which is not a reliable indicator of future results. The high correlation among the portfolio's assets suggests limited diversification benefits, which could impact the portfolio's ability to mitigate risk in turbulent markets.

Asset classes Info

  • Stocks
    100%
  • Cash
    0%

The portfolio's allocation is entirely in stocks, with no exposure to other asset classes such as bonds, real estate, or commodities. This lack of diversification across asset classes can increase the portfolio's risk, particularly during stock market downturns when equities are more likely to decline in unison. Diversifying across different asset classes can help smooth out returns and reduce overall portfolio volatility.

Sectors Info

  • Technology
    32%
  • Financials
    14%
  • Consumer Discretionary
    11%
  • Health Care
    10%
  • Telecommunications
    9%
  • Industrials
    8%
  • Consumer Staples
    6%
  • Energy
    3%
  • Utilities
    2%
  • Real Estate
    2%
  • Basic Materials
    2%

Sector allocations within the portfolio are concentrated in technology, financial services, and consumer cyclicals, which are sectors that can offer high growth potential. However, this concentration also exposes the portfolio to sector-specific risks, such as regulatory changes or economic shifts that disproportionately affect these industries. A more balanced sector allocation could reduce the portfolio's vulnerability to single-sector downturns.

Regions Info

  • North America
    100%
  • Europe Developed
    0%
  • Asia Developed
    0%
  • Asia Emerging
    0%
  • Latin America
    0%

The portfolio's geographic allocation is entirely focused on North America, with no exposure to international markets. This geographic concentration limits the portfolio's potential to benefit from growth in other regions and increases its susceptibility to US-specific economic risks. Diversifying geographically can introduce exposure to different economic cycles and growth opportunities, potentially enhancing returns and reducing risk.

Market capitalization Info

  • Mega-cap
    45%
  • Large-cap
    33%
  • Mid-cap
    18%
  • Small-cap
    3%
  • Micro-cap
    1%

The portfolio's market capitalization exposure is skewed towards mega and big-cap stocks, which tend to be more stable and less volatile than smaller-cap stocks. While this can be beneficial during market downturns, it may also limit the portfolio's growth potential, as smaller-cap stocks often offer higher growth opportunities. Including a broader mix of market capitalizations could balance stability with growth potential.

Redundant positions Info

  • Vanguard Total Stock Market Index Fund ETF Shares
    SPDR S&P 500 ETF Trust
    Vanguard S&P 500 ETF
    High correlation

The high correlation among the portfolio's ETFs suggests redundancy in holdings, which diminishes the benefits of diversification. This overlap means that the portfolio may not be as diversified as it appears, as similar assets are likely to respond in the same way to market conditions. Reducing overlap by selecting assets with lower correlations can enhance diversification and potentially improve the portfolio's risk-adjusted returns.

Dividends Info

  • SPDR S&P 500 ETF Trust 0.90%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.20%
  • Weighted yield (per year) 1.12%

The portfolio's dividend yield stands at 1.12%, contributing to its total return. While dividends can provide a steady income stream and help cushion the portfolio during market dips, the primary focus on growth-oriented ETFs means that the portfolio may not be maximizing its potential for dividend income. Investors seeking higher income might consider allocating a portion of the portfolio to higher-yielding assets.

Ongoing product costs Info

  • SPDR S&P 500 ETF Trust 0.10%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Weighted costs total (per year) 0.05%

The portfolio benefits from low overall costs, with a Total Expense Ratio (TER) of 0.05%. This efficient cost structure is advantageous for long-term growth, as lower costs directly translate to higher net returns for investors. Maintaining a focus on cost efficiency is crucial, especially in a low-diversification strategy where the impact of costs can be more pronounced over time.

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.

Optimizing the portfolio for risk versus return suggests that a more efficient allocation could achieve an expected return of 14.48% with a similar risk level. This implies that the current portfolio may not be positioned optimally to balance risk and return. By diversifying and reducing the overlap in highly correlated assets, the portfolio could potentially increase its efficiency, enhancing returns for the same level of risk.

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