Growth-Oriented Portfolio with Strong U.S. Focus and High Correlation Among Core Holdings

Report created on Dec 5, 2024

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

4/5
Broadly Diversified
Less diversification More diversification

Positions

The portfolio consists of four ETFs, with a strong emphasis on U.S. equities. The largest position is the Vanguard Total Stock Market Index Fund ETF, making up 34% of the portfolio. This is followed by the Schwab U.S. Large-Cap Growth ETF at 25%, Vanguard S&P 500 Growth Index Fund ETF at 21%, and Vanguard Total International Stock Index Fund ETF at 20%. This composition suggests a growth-oriented strategy with a significant allocation to U.S. stocks, reflecting a broadly diversified approach. Given the high allocation to U.S. equities, it is crucial to monitor the performance and risks associated with this market.

Growth Info

Historically, the portfolio has performed well, with a compound annual growth rate (CAGR) of 13.92%. The maximum drawdown was -33.17%, indicating the potential for significant volatility. The portfolio's returns are concentrated, with 90% of returns coming from just 33 days. This performance suggests that while the portfolio has delivered strong returns, it is also subject to periods of high volatility. Investors should be aware of the potential for drawdowns and consider their risk tolerance when evaluating this portfolio's historical performance.

Projection Info

Using a Monte Carlo simulation with 1,000 iterations, the portfolio's future performance was projected, assuming a hypothetical initial investment. The simulation suggests a wide range of potential outcomes, with a 5th percentile return of 65.75% and a 67th percentile return of 648.31%. The median (50th percentile) outcome is a return of 439.88%. This indicates a high level of uncertainty and variability in future returns, which is typical for growth-oriented portfolios. Investors should be prepared for a range of outcomes and consider their long-term investment goals.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily weighted towards stocks, with 99.6% of assets in equities. A small portion is held in cash and other asset classes, but these allocations are negligible. This high concentration in stocks aligns with a growth-focused strategy but also increases exposure to market volatility. Investors should consider whether this asset allocation aligns with their risk tolerance and investment objectives. Diversifying into other asset classes, such as bonds, could help reduce overall portfolio risk.

Sectors Info

  • Technology
    36%
  • Consumer Discretionary
    12%
  • Financials
    12%
  • Health Care
    10%
  • Telecommunications
    10%
  • Industrials
    8%
  • Consumer Staples
    4%
  • Basic Materials
    3%
  • Energy
    3%
  • Real Estate
    2%
  • Utilities
    2%

The sector allocation is dominated by technology at 35.86%, followed by consumer cyclicals and financial services. This concentration in technology reflects a growth bias, as tech stocks have historically driven significant gains. However, it also exposes the portfolio to sector-specific risks. A more balanced sector allocation could help mitigate these risks and provide stability during market downturns. Investors should evaluate whether this sector concentration aligns with their risk appetite and consider rebalancing if necessary.

Regions Info

  • North America
    81%
  • Europe Developed
    8%
  • Asia Emerging
    3%
  • Japan
    3%
  • Asia Developed
    2%
  • Australasia
    1%
  • Africa/Middle East
    1%

Geographically, the portfolio is heavily weighted towards North America, accounting for 81.29% of the allocation. Other regions, such as Europe Developed and Asia Emerging, have minimal representation. This U.S.-centric focus may limit exposure to global growth opportunities and increase vulnerability to U.S. market fluctuations. Diversifying geographically could enhance growth potential and reduce regional risk. Investors should assess their comfort with this geographic concentration and consider broadening their exposure to international markets.

Redundant positions Info

  • Vanguard Total Stock Market Index Fund ETF Shares
    Schwab U.S. Large-Cap Growth ETF
    Vanguard S&P 500 Growth Index Fund ETF Shares
    High correlation

The portfolio's assets show high correlation, particularly among the U.S.-focused ETFs. The Vanguard Total Stock Market, Schwab U.S. Large-Cap Growth, and Vanguard S&P 500 Growth ETFs move similarly, offering limited diversification benefits. This high correlation can amplify risk during market downturns. To improve diversification, investors might consider reducing overlap and incorporating assets with low correlation to the existing holdings. This could help stabilize returns and reduce portfolio volatility 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.

Click on the colored dots to explore allocations.

Before optimizing, focus on reducing highly correlated assets that don't add diversification. Moving along the efficient frontier can adjust risk levels. For a riskier portfolio, increase exposure to high-growth assets, while a more conservative approach might involve adding bonds. The current portfolio is growth-focused, so consider whether this aligns with investment goals. Optimization should aim for a balance between risk and return, ensuring the portfolio meets long-term objectives. Once correlation issues are addressed, further fine-tuning can enhance performance and reduce volatility.

Dividends Info

  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • Vanguard S&P 500 Growth Index Fund ETF Shares 0.60%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.20%
  • Vanguard Total International Stock Index Fund ETF Shares 2.90%
  • Weighted yield (per year) 1.21%

The portfolio's dividend yield stands at 1.21%, with the Vanguard Total International Stock Index Fund ETF contributing the highest yield at 2.9%. This yield is relatively modest, reflecting the growth-oriented nature of the portfolio. While dividends provide a steady income stream, the primary focus here is on capital appreciation. Investors seeking higher income might consider increasing exposure to dividend-paying assets. However, it's essential to balance income needs with growth objectives to maintain alignment with long-term goals.

Ongoing product costs Info

  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • Vanguard S&P 500 Growth Index Fund ETF Shares 0.10%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.06%

The portfolio's total expense ratio (TER) is low at 0.06%, indicating cost-efficiency. The Schwab U.S. Large-Cap Growth ETF has the lowest expense ratio at 0.04%, while the Vanguard S&P 500 Growth ETF is slightly higher at 0.1%. Keeping costs low is crucial for maximizing returns, especially in a growth-focused portfolio. Investors should continue to monitor and manage costs, ensuring that expense ratios remain competitive. This focus on cost-efficiency supports long-term wealth accumulation by minimizing the impact of fees on overall returns.

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