A growth-focused portfolio with high risk and low diversification primarily in US large-cap stocks

Report created on Jan 5, 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 is heavily concentrated in two ETFs, with over 99% allocated to stocks. Such a composition reflects a strong focus on growth, typical of a high-risk profile. Compared to a balanced portfolio, which includes bonds and international equities, this setup is less diversified. To mitigate risk, consider incorporating different asset classes, such as bonds or international stocks, which can provide stability and reduce volatility during market downturns.

Growth Info

Historically, the portfolio has delivered impressive returns, with a CAGR of 21.89%. However, it has also experienced significant volatility, as indicated by a max drawdown of -31.69%. This high return comes with high risk, which is common for growth-focused portfolios. While past performance is promising, it's crucial to remember that it doesn't guarantee future results. Regularly monitoring performance against benchmarks can help ensure the portfolio stays aligned with your goals.

Projection Info

The Monte Carlo simulation projects a wide range of potential outcomes, with a median growth of 1,600.31%. This method uses historical data to estimate future performance, but it should be noted that it's not a guarantee. The positive results across all simulations suggest a strong potential for growth. However, consider the inherent uncertainties and prepare for possible market fluctuations by maintaining a diversified investment strategy.

Asset classes Info

  • Stocks
    100%

The portfolio's heavy reliance on stocks, accounting for nearly 100% of assets, limits diversification. While stocks typically offer higher returns, they also come with increased risk. A more balanced allocation, including bonds or alternative investments, could reduce volatility and provide more consistent returns. Comparing this portfolio to a standard benchmark, which often includes a mix of asset classes, highlights the need for diversification to manage risk effectively.

Sectors Info

  • Technology
    35%
  • Financials
    15%
  • Consumer Discretionary
    14%
  • Telecommunications
    11%
  • Health Care
    10%
  • Industrials
    7%
  • Consumer Staples
    5%
  • Energy
    2%
  • Utilities
    1%
  • Basic Materials
    1%
  • Real Estate
    1%

The portfolio is highly concentrated in the technology sector, comprising over 35% of assets. While this sector has shown strong growth, it can also be volatile, particularly during economic shifts. Other sectors, like financial services and consumer cyclicals, provide some balance but remain underrepresented compared to benchmarks. To enhance diversification, consider adjusting sector weights to reduce reliance on any single industry and better align with broader market trends.

Regions Info

  • North America
    99%
  • Europe Developed
    1%

With over 99% exposure to North America, the portfolio lacks geographic diversification. This concentration increases vulnerability to regional economic downturns. Including international equities can spread risk and capture growth opportunities in other markets. While North American stocks have performed well, diversifying geographically can provide a hedge against potential local market declines and align more closely with global benchmarks.

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 can be optimized using the Efficient Frontier, which identifies the best possible return for a given level of risk. Currently, the focus on high-growth stocks may not fully utilize this potential. By adjusting asset allocations, such as incorporating bonds or international equities, you can achieve a more efficient balance. This approach maximizes returns without unnecessarily increasing risk, aligning with the portfolio's growth objectives.

Dividends Info

  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • Invesco S&P 500® Momentum ETF 0.50%
  • Weighted yield (per year) 0.45%

The portfolio's dividend yield is modest at 0.45%, reflecting its growth-oriented focus. While dividends provide a steady income stream, their low contribution here suggests reliance on capital gains for returns. For those seeking income, incorporating dividend-focused investments could enhance cash flow. However, if growth remains the priority, the current yield aligns well with the portfolio's objectives.

Ongoing product costs Info

  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • Invesco S&P 500® Momentum ETF 0.13%
  • Weighted costs total (per year) 0.09%

The portfolio benefits from low costs, with a total expense ratio (TER) of 0.09%. This is advantageous as lower costs can significantly enhance long-term returns by reducing the drag on performance. Staying vigilant about fees and considering cost-effective alternatives, such as low-cost index funds, can further optimize portfolio efficiency. The current cost structure is commendable and supports the portfolio's growth strategy.

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