A growth-focused portfolio with high US equity concentration and moderate dividend yield

Report created on Dec 8, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

The portfolio is composed of three ETFs, with a significant focus on US equities. The Vanguard S&P 500 ETF holds the largest share at 50%, followed by the Invesco NASDAQ 100 ETF and Schwab U.S. Dividend Equity ETF at 25% each. This structure emphasizes large-cap stocks, particularly in the technology sector, which can drive growth. However, the concentration in a limited number of ETFs and sectors results in low diversification. To mitigate risk, consider adding different asset classes or sectors to achieve a more balanced portfolio.

Growth Info

Historically, the portfolio has performed well, with a compound annual growth rate (CAGR) of 15.84%. This is impressive, indicating strong returns over time. However, the maximum drawdown of -24.45% highlights the potential for significant losses during market downturns. Investors should be aware that past performance does not guarantee future results. It's crucial to maintain a diversified strategy to cushion against volatility and potential losses.

Projection Info

Using Monte Carlo simulations, the portfolio's future performance was assessed. This method uses historical data to project potential outcomes, with 1,000 simulations indicating an annualized return of 17.22%. The median outcome suggests a significant growth potential, but it's important to remember that these are probabilistic forecasts, not guarantees. Investors should use these projections as a guide, while considering their risk tolerance and investment goals.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily weighted in stocks, constituting approximately 99.93% of the total assets, with a negligible cash position. This concentration in equities can lead to high returns but also increases exposure to market volatility. Diversifying into other asset classes like bonds or real estate can help balance the risk and provide more stable returns over time. A more varied asset allocation could enhance the portfolio's resilience in different market conditions.

Sectors Info

  • Technology
    32%
  • Financials
    12%
  • Consumer Discretionary
    11%
  • Health Care
    11%
  • Telecommunications
    10%
  • Consumer Staples
    8%
  • Industrials
    8%
  • Energy
    5%
  • Basic Materials
    2%
  • Utilities
    2%
  • Real Estate
    1%

Sector allocation is skewed towards technology, which makes up about 31.94% of the portfolio. While technology has been a strong performer, this concentration increases vulnerability to sector-specific downturns. Other sectors like financial services and consumer cyclicals are represented but to a lesser extent. To reduce risk, consider increasing exposure to underrepresented sectors, which can help mitigate potential losses from sector-specific declines.

Regions Info

  • North America
    99%
  • Europe Developed
    1%

The portfolio is predominantly focused on North American assets, with 98.93% exposure. This concentration limits geographic diversification and increases vulnerability to regional economic downturns. Although there is minor exposure to Europe, Latin America, and Asia, it is not significant enough to provide a hedge. Expanding geographic exposure can help manage risk and tap into growth opportunities in international markets.

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 could potentially be optimized using the Efficient Frontier, which seeks the best risk-return ratio. This involves adjusting the current asset weightings to achieve an optimal balance. However, optimization is limited to the assets already in the portfolio and does not account for external factors. By rebalancing towards more efficient allocations, investors can potentially enhance returns without increasing risk. Regularly reassessing the portfolio's efficiency is beneficial.

Dividends Info

  • Invesco NASDAQ 100 ETF 0.60%
  • Schwab U.S. Dividend Equity ETF 2.50%
  • Vanguard S&P 500 ETF 1.20%
  • Weighted yield (per year) 1.38%

The portfolio has a moderate dividend yield of 1.38%, with the Schwab U.S. Dividend Equity ETF contributing the most at 2.5%. While dividends can provide a steady income stream, the focus on growth-oriented ETFs reduces the overall yield. Investors seeking income might consider increasing exposure to dividend-paying stocks or funds. Balancing growth and income can help achieve a more comprehensive return profile.

Ongoing product costs Info

  • Invesco NASDAQ 100 ETF 0.15%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.07%

Portfolio costs are low, with a total expense ratio (TER) of 0.07%. This is advantageous, as lower costs can enhance net returns over the long term. The Vanguard S&P 500 ETF has the lowest cost at 0.03%, while the Invesco NASDAQ 100 ETF is the highest at 0.15%. Keeping costs low is crucial, especially for long-term investors, as high fees can significantly erode returns. Regularly reviewing and optimizing for cost efficiency is recommended.

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