A growth-focused portfolio with concentrated U.S. exposure and moderate risk profile

Report created on Jan 27, 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. equities, with 60% in the Vanguard S&P 500 ETF, 20% in the Avantis U.S. Small Cap Value ETF, and 20% in the Schwab U.S. Large-Cap Growth ETF. This composition emphasizes large-cap U.S. stocks, with a significant focus on growth and value strategies. While this allocation aligns with a growth-focused strategy, it lacks diversification across asset classes, which could expose the portfolio to higher volatility. Consider introducing other asset classes, such as bonds or international equities, to enhance diversification and potentially reduce risk.

Growth Info

Historically, the portfolio has delivered a strong CAGR of 18.66%, significantly outperforming typical market benchmarks. However, it also experienced a maximum drawdown of -35.92%, highlighting the potential risks associated with its concentrated equity exposure. While past performance is not indicative of future results, this history suggests the portfolio can achieve high returns during favorable market conditions. To mitigate potential downturns, consider strategies like rebalancing or incorporating defensive assets.

Projection Info

The Monte Carlo simulation, which uses historical data to project future outcomes, indicates a wide range of potential returns. With a median return of 974.3% and a 67th percentile return of 1,563.6%, the portfolio shows promise for substantial growth. However, the 5th percentile return of just 121.3% underscores the inherent uncertainty in projections. Keep in mind that simulations rely on historical data and do not guarantee future performance. Regularly reviewing and adjusting the portfolio can help manage risks and align with changing market conditions.

Asset classes Info

  • Stocks
    100%

The portfolio is entirely invested in stocks, which can lead to high growth potential but also increased volatility. This 100% equity allocation may not suit all investors, especially those seeking stability or income. Compared to a more diversified benchmark, this portfolio lacks exposure to other asset classes like bonds or real estate, which could provide balance and reduce risk. Introducing a small allocation to fixed income or alternative investments could improve diversification and potentially enhance risk-adjusted returns.

Sectors Info

  • Technology
    31%
  • Financials
    15%
  • Consumer Discretionary
    12%
  • Industrials
    9%
  • Health Care
    9%
  • Telecommunications
    8%
  • Energy
    5%
  • Consumer Staples
    5%
  • Basic Materials
    3%
  • Utilities
    2%
  • Real Estate
    2%

The sector allocation is heavily tilted towards technology at 31%, followed by financial services and consumer cyclicals. This concentration in tech could lead to higher volatility, especially during periods of rising interest rates or regulatory changes. While tech has driven market gains recently, diversification across sectors can help cushion against sector-specific downturns. Consider adding exposure to underrepresented sectors such as utilities or real estate to balance the portfolio and reduce potential risks associated with sector concentration.

Regions Info

  • North America
    99%

Geographically, the portfolio is almost entirely focused on North America, with 99% exposure. This lack of international diversification could lead to increased vulnerability to U.S.-specific economic or political events. While the U.S. market has been a strong performer, incorporating international equities could provide exposure to different growth opportunities and reduce potential risks associated with a single market focus. Consider gradually adding global equities to enhance geographic diversification.

Market capitalization Info

  • Mega-cap
    42%
  • Large-cap
    25%
  • Mid-cap
    13%
  • Small-cap
    11%
  • Micro-cap
    9%

The portfolio has a significant allocation to mega-cap stocks at 42%, followed by large, medium, small, and micro caps. This mix provides exposure to both established companies and smaller, potentially higher-growth firms. However, the heavy weighting in mega-caps may limit the potential for outsized gains compared to a more balanced approach. Consider adjusting the allocation to include more mid-cap or small-cap stocks, which can offer growth potential while maintaining a diversified market cap exposure.

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's current allocation could be optimized using the Efficient Frontier, which seeks the best possible risk-return ratio with existing assets. While the focus is on growth, adjusting allocations among the three ETFs could enhance efficiency without altering the overall strategy. This approach doesn't necessarily diversify the portfolio but aims to achieve the highest return for a given level of risk. Regularly reviewing the allocations can ensure the portfolio remains aligned with your risk tolerance and return goals.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.60%
  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • Vanguard S&P 500 ETF 1.20%
  • Weighted yield (per year) 1.12%

With a total dividend yield of 1.12%, the portfolio provides limited income, which may not meet the needs of income-focused investors. Dividends can be a reliable source of returns, especially in volatile markets. While growth is the primary focus, consider balancing the portfolio with higher-yielding assets to enhance income potential. This could involve adding dividend-focused ETFs or stocks with a history of stable payouts, which can provide a steady cash flow and reduce reliance on capital gains.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.08%

The portfolio's total expense ratio (TER) of 0.08% is impressively low, which supports better long-term performance by minimizing costs. Lower expenses mean more of your returns stay in your pocket, compounding over time to enhance overall gains. This cost efficiency aligns well with industry best practices and contributes positively to the portfolio's growth potential. Keep monitoring for any changes in fund fees and consider low-cost alternatives if necessary to maintain this advantage.

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