A concentrated growth-focused portfolio with notable U.S. small and large-cap exposure

Report created on Feb 3, 2025

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

This portfolio consists of two ETFs, each making up 50% of the total allocation. One ETF focuses on U.S. small-cap value stocks, while the other targets U.S. large-cap growth stocks. This composition reflects a concentrated approach with a significant emphasis on U.S. equities. Compared to a typical diversified portfolio, this structure may lack exposure to international markets and other asset classes like bonds or real estate. A more diversified asset allocation could potentially reduce risk and enhance returns by spreading investments across different regions and sectors.

Growth Info

The portfolio's historic performance boasts a compound annual growth rate (CAGR) of 20.18%, indicating strong past returns. However, it also experienced a maximum drawdown of -38.86%, which highlights the potential volatility associated with the current asset allocation. This performance is compared to benchmarks, showing that while returns have been impressive, they came with significant risk. Historical data can provide insights, but it's important to remember that past performance does not guarantee future results. Maintaining a balance between growth and risk can be crucial for sustainable long-term returns.

Projection Info

Monte Carlo simulations, which use historical data to project potential future outcomes, suggest a wide range of possible returns. With 1,000 simulations, the portfolio's potential end values range significantly, showing a 5th percentile return of 82.6% and a 67th percentile return of 1,587.9%. While 986 simulations yielded positive returns, it's important to note that these projections are based on past data and may not account for future market changes. This highlights the importance of regularly reviewing and adjusting the portfolio to align with evolving market conditions and personal investment goals.

Asset classes Info

  • Stocks
    100%

The portfolio is entirely allocated to stocks, which reflects a high-risk, high-reward strategy typical of growth-focused portfolios. While this can lead to substantial returns during market upswings, it also exposes the portfolio to significant volatility. Compared to a more balanced asset allocation that includes bonds or other fixed-income securities, this approach may not provide the same level of stability or income generation. Diversifying across different asset classes could help mitigate risk and smooth out returns over time, especially during market downturns.

Sectors Info

  • Technology
    28%
  • Financials
    17%
  • Consumer Discretionary
    14%
  • Industrials
    11%
  • Energy
    8%
  • Telecommunications
    8%
  • Health Care
    6%
  • Basic Materials
    4%
  • Consumer Staples
    3%

The portfolio's sector allocation is heavily skewed towards technology at 28%, followed by financial services at 17%. This concentration in technology may lead to higher volatility, especially during periods of interest rate hikes or regulatory changes. While the sector allocation aligns with some growth benchmarks, it may benefit from greater balance to reduce sector-specific risks. Diversifying into more stable sectors like consumer defensives or utilities could provide a buffer against market fluctuations, contributing to a more resilient portfolio.

Regions Info

  • North America
    99%
  • Latin America
    1%

With 99% of the portfolio allocated to North America, there is limited geographic diversification. This heavy reliance on the U.S. market can expose the portfolio to regional economic and political risks. Compared to global benchmarks, this allocation lacks exposure to emerging markets, which can offer growth opportunities. Expanding geographic diversification to include international markets could enhance the portfolio's resilience and capitalize on global growth trends. This approach may help reduce the impact of potential downturns in the U.S. market.

Market capitalization Info

  • Mega-cap
    34%
  • Small-cap
    26%
  • Micro-cap
    23%
  • Large-cap
    10%
  • Mid-cap
    7%

The portfolio's market capitalization allocation is diverse, with a notable 34% in mega-cap stocks and 26% in small-cap stocks. This mix provides a blend of stability from larger companies and growth potential from smaller ones. However, the significant allocation to micro and small caps may increase volatility, as these stocks tend to be more sensitive to market fluctuations. Balancing the allocation towards medium and large caps could help reduce risk while maintaining growth potential, providing a more stable foundation for long-term 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's risk-return profile could be optimized using the Efficient Frontier, which identifies the best possible risk-return ratio based on current assets. The optimal portfolio suggests a potential return of 21.86% with a risk level of 24.68%, slightly above the current expected return. Optimization involves reallocating between existing assets to achieve better efficiency. While this approach can improve returns, it's important to consider personal investment goals and risk tolerance. Regularly reviewing and adjusting the portfolio ensures alignment with evolving market conditions and financial objectives.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.60%
  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • Weighted yield (per year) 1.00%

The portfolio's dividend yield stands at 1%, with the Avantis® U.S. Small Cap Value ETF contributing a higher yield of 1.60% compared to the Schwab U.S. Large-Cap Growth ETF's 0.40%. Dividends can provide a steady income stream and contribute to total returns, especially in volatile markets. For investors seeking income, increasing exposure to dividend-paying stocks or ETFs could enhance the portfolio's yield. This strategy may also offer some downside protection, as dividend-paying companies are often more stable and less volatile.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • Weighted costs total (per year) 0.14%

The portfolio has a total expense ratio (TER) of 0.14%, which is relatively low and beneficial for long-term performance. Lower costs mean more of the portfolio's returns are retained, enhancing compounding effects over time. Compared to industry averages, this TER is competitive, supporting efficient growth. While the current costs are favorable, it's important to regularly review expense ratios, especially if considering new investments. Keeping costs low remains a key factor in optimizing portfolio returns and achieving financial goals.

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