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

Report created on Dec 16, 2024

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

This portfolio predominantly consists of ETFs with a strong focus on U.S. equities, accounting for nearly 100% of the assets. The largest holding is the Schwab U.S. Dividend Equity ETF, making up 36.92% of the portfolio, followed by the Schwab U.S. Large-Cap Growth ETF at 27.48%. The portfolio also includes the SPDR® Portfolio S&P 500 ETF and a single common stock, Palantir Technologies Inc. While this composition indicates a focus on growth and dividend income, the heavy reliance on a few ETFs suggests limited diversification. To enhance portfolio stability, consider adding different asset classes such as bonds or international equities.

Growth Info

Historically, the portfolio has demonstrated strong performance, with a compound annual growth rate (CAGR) of 23.26%. However, it has also experienced significant volatility, evidenced by a maximum drawdown of -31.36%. This suggests that while the portfolio has the potential for high returns, it is also susceptible to substantial losses during market downturns. Understanding this historical performance is crucial for setting realistic expectations and aligning them with personal risk tolerance. To mitigate potential losses, consider diversifying investments across less volatile asset classes.

Projection Info

Using Monte Carlo simulations, which model a wide range of potential future outcomes based on historical data, the portfolio's future performance appears promising. The simulations indicate an annualized return of 33.94%, with a 990 out of 1,000 simulations yielding positive returns. However, it's important to note that these projections are based on past data and cannot guarantee future results. To manage risk, regularly review and adjust the portfolio in response to changing market conditions and personal financial goals.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily skewed towards stocks, comprising 99.93% of the total allocation, with a negligible amount in cash. This high concentration in a single asset class can lead to increased volatility and risk, especially during market downturns. Diversification across multiple asset classes, such as bonds or real estate, can help stabilize returns and reduce overall risk. Consider reallocating a portion of the portfolio to include fixed-income securities to achieve a more balanced risk-return profile.

Sectors Info

  • Technology
    39%
  • Financials
    12%
  • Health Care
    11%
  • Consumer Discretionary
    10%
  • Industrials
    7%
  • Telecommunications
    7%
  • Consumer Staples
    7%
  • Energy
    6%
  • Basic Materials
    1%
  • Utilities
    1%
  • Real Estate
    1%

The portfolio shows a significant concentration in the technology sector, which accounts for 39.37% of the total allocation. Other sectors, such as financial services and healthcare, have smaller but notable allocations. While sector concentration can lead to higher returns when those sectors perform well, it also increases vulnerability to sector-specific downturns. To reduce risk, consider diversifying into underrepresented sectors like utilities or real estate, which may offer more stable returns and lower correlation with the technology sector.

Regions Info

  • North America
    100%

Geographic exposure is overwhelmingly concentrated in North America, accounting for 99.55% of the portfolio. This lack of geographic diversification can expose the portfolio to region-specific risks, such as economic downturns or political instability in the U.S. To mitigate these risks, consider increasing exposure to international markets, particularly emerging economies, which can offer growth opportunities and diversification benefits. Allocating a portion of the portfolio to global equities can help balance regional risk and enhance long-term returns.

Redundant positions Info

  • Fidelity® MSCI Information Technology Index ETF
    Schwab U.S. Large-Cap Growth ETF
    High correlation

The portfolio contains highly correlated assets, particularly among technology-focused ETFs like the Fidelity® MSCI Information Technology Index ETF and the Schwab U.S. Large-Cap Growth ETF. High correlation means these assets tend to move in the same direction, reducing the diversification benefits. To manage risk effectively, consider replacing some of these correlated assets with those that have historically shown lower correlation, thereby enhancing the portfolio's ability to withstand market volatility and improve risk-adjusted returns.

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 be optimized using the Efficient Frontier, which identifies the best possible risk-return ratio by adjusting the current asset allocation. This optimization focuses on maximizing returns for a given level of risk or minimizing risk for a desired return. By reallocating assets within the existing portfolio, you can potentially achieve a more efficient balance. However, it's important to note that this approach does not necessarily address diversification or other investment goals. Regular reviews and adjustments can help maintain optimal performance.

Dividends Info

  • Fidelity® MSCI Information Technology Index ETF 0.40%
  • Schwab U.S. Dividend Equity ETF 3.50%
  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • SPDR® Portfolio S&P 500 ETF 1.20%
  • Weighted yield (per year) 1.66%

The portfolio's overall dividend yield stands at 1.66%, largely driven by the Schwab U.S. Dividend Equity ETF, which offers a yield of 3.5%. Dividends can provide a steady income stream and help cushion against market volatility. However, the focus on growth-oriented ETFs, which typically offer lower yields, suggests a primary emphasis on capital appreciation rather than income. If income generation is a priority, consider increasing allocations to dividend-focused investments or high-yield bonds to enhance the portfolio's income potential.

Ongoing product costs Info

  • Fidelity® MSCI Information Technology Index ETF 0.08%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • SPDR® Portfolio S&P 500 ETF 0.02%
  • Weighted costs total (per year) 0.04%

With a total expense ratio (TER) of 0.04%, the portfolio benefits from relatively low costs, which can significantly enhance long-term returns. Lower fees mean more of the investment returns are retained, allowing compounding to work more effectively over time. While the current cost structure is favorable, it's essential to remain vigilant about any changes in fees or expenses. Regularly reviewing and comparing costs can help ensure the portfolio remains cost-efficient and aligned with financial goals.

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