Moderate Diversification with High Growth Potential and Slight Overlap in Large-Cap Holdings

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 is suitable for growth-oriented investors with a moderate risk tolerance who are comfortable with market volatility. Such investors typically have long-term investment horizons and seek capital appreciation rather than immediate income. They are likely to be in the wealth accumulation phase, focusing on maximizing returns. The portfolio's heavy equity weighting and concentration in U.S. large-cap stocks align with the goals of investors who are willing to accept short-term fluctuations for potential long-term gains. These investors should be prepared for periodic market downturns and remain committed to their investment strategy.

Positions

  • Schwab U.S. Large-Cap ETF
    SCHX - US8085242019
    60.00%
  • Schwab U.S. Large-Cap Growth ETF
    SCHG - US8085243009
    30.00%
  • Avantis® U.S. Small Cap Value ETF
    AVUV - US0250728773
    5.00%
  • SPDR S&P World ex US
    SPDW - US78463X8891
    5.00%

The portfolio is heavily weighted towards U.S. large-cap equities, with Schwab U.S. Large-Cap ETF making up 60% and Schwab U.S. Large-Cap Growth ETF accounting for another 30%. The portfolio also includes a small allocation to U.S. small-cap value stocks and a global ex-U.S. ETF, each at 5%. This composition indicates a strong focus on growth, particularly in the U.S. market. While this setup can capitalize on the robust performance of large-cap stocks, it may also expose the portfolio to increased volatility. Consider diversifying further to reduce potential risks.

Growth Info

Historically, the portfolio has delivered an impressive compound annual growth rate (CAGR) of 19.59%, which suggests strong past performance. However, it's important to note the maximum drawdown of -34.25%, highlighting the potential for significant losses during market downturns. This level of volatility could be concerning, especially for investors with lower risk tolerance. To mitigate this, consider strategies to manage drawdowns, such as increasing allocations in less volatile asset classes or incorporating defensive sectors to provide a cushion during market turbulence.

Projection Info

Using a Monte Carlo simulation with 1,000 iterations, the portfolio shows promising future growth potential. The median scenario projects a 740.55% increase, while the best-case scenario reaches 1,166.81%. However, the worst-case scenario still sees a 66.47% increase. This simulation provides a range of possible outcomes, helping to understand the potential risks and rewards. It emphasizes the importance of staying invested for the long term to ride out market fluctuations and maximize the portfolio's growth potential. Regularly reviewing and adjusting the portfolio can help align it with evolving financial goals.

Asset classes

  • Stocks
    100%
  • Cash
    0%
  • Bonds
    0%
  • Other
    0%

The portfolio is predominantly composed of stocks, accounting for nearly 100% of the allocation, with negligible amounts in cash, bonds, and other assets. This heavy equity weighting aligns with a growth-oriented strategy but also increases vulnerability to market volatility. A more balanced asset class distribution could enhance the portfolio's resilience against market downturns. Consider incorporating bonds or other fixed-income assets to provide stability and reduce overall risk, especially if nearing retirement or needing to preserve capital.

Sectors

  • Technology
    35%
  • Financials
    13%
  • Consumer Discretionary
    11%
  • Health Care
    10%
  • Telecommunications
    9%
  • Industrials
    8%
  • Consumer Staples
    4%
  • Energy
    3%
  • Basic Materials
    2%
  • Utilities
    2%
  • Real Estate
    2%

Sector-wise, the portfolio is heavily concentrated in technology, which constitutes over 35% of the allocation. Other significant sectors include financial services, consumer cyclicals, and healthcare. While tech has been a strong performer, over-concentration could lead to increased risk if the sector faces downturns. Diversifying across more sectors could mitigate this risk and provide a more stable return profile. Consider evaluating the current sector allocations and redistributing to underrepresented sectors that could offer growth opportunities and risk reduction.

Regions

  • North America
    95%
  • Europe Developed
    3%
  • Japan
    1%
  • Asia Developed
    0%
  • Australasia
    0%
  • Latin America
    0%
  • Asia Emerging
    0%
  • Africa/Middle East
    0%

Geographically, the portfolio is concentrated in North America, with a 95% allocation, and minimal exposure to other regions. This heavy reliance on the U.S. market can limit opportunities for global diversification and increase vulnerability to domestic economic fluctuations. Expanding geographic diversification can help capture growth in other regions and reduce dependence on the U.S. economy. Consider gradually increasing exposure to international markets to benefit from global economic trends and enhance the portfolio's resilience.

Redundant positions

  • Schwab U.S. Large-Cap ETF
    Schwab U.S. Large-Cap Growth ETF
    High correlation

The portfolio exhibits high correlation between the Schwab U.S. Large-Cap ETF and Schwab U.S. Large-Cap Growth ETF. This overlap offers little diversification benefit, potentially duplicating risk exposure. Reducing exposure to highly correlated assets can improve diversification and optimize risk-adjusted returns. Consider evaluating the necessity of holding both ETFs and explore alternatives that provide broader diversification. This adjustment could enhance the portfolio's ability to weather market fluctuations and improve the overall investment experience.

Dividends

  • Avantis® U.S. Small Cap Value ETF 1.50%
  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • Schwab U.S. Large-Cap ETF 1.70%
  • SPDR S&P World ex US 2.70%
  • Weighted yield (per year) 1.35%

The portfolio's dividend yield stands at 1.35%, with the highest yield from SPDR S&P World ex US ETF at 2.7%. While dividends provide a steady income stream, the current yield is modest, reflecting the growth focus. For investors seeking income, exploring higher-yielding assets could be beneficial. Balancing growth and income objectives is crucial to meet financial goals. Consider reviewing dividend policies and exploring opportunities to enhance income without compromising growth potential. This approach can create a more balanced portfolio that supports both capital appreciation and income generation.

Ongoing product costs

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • Schwab U.S. Large-Cap ETF 0.03%
  • SPDR S&P World ex US 0.03%
  • Weighted costs total (per year) 0.04%

The portfolio's total expense ratio (TER) is relatively low at 0.04%, indicating cost-efficient management. Low costs are crucial for maximizing net returns over time. The Avantis U.S. Small Cap Value ETF has the highest cost at 0.25%, but it remains reasonable. Maintaining a focus on cost efficiency is essential for long-term success. Regularly reviewing expense ratios and seeking low-cost alternatives can enhance the portfolio's performance. This cost-conscious approach ensures that more of the investment returns are retained, contributing to achieving financial objectives.

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.

Before optimizing the portfolio, addressing the overlap in highly correlated assets is crucial. Removing such assets can enhance diversification and reduce unnecessary risk exposure. Once this is addressed, consider moving along the efficient frontier to adjust the portfolio's risk profile. Allocating more to fixed-income assets can create a more conservative portfolio, while increasing equity exposure can heighten risk and return potential. This strategic adjustment can help align the portfolio with personal risk tolerance and financial goals, ensuring a more tailored investment approach.

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