A well-diversified portfolio with a focus on US equities and moderate international exposure
Report created on Jan 1, 2025Risk profile
4/7
Diversification profile
4/5
Positions
-
VO Vanguard S&P 500 ETF
VOO - US9229083632 60.00% -
VX Vanguard Total International Stock Index Fund ETF Shares
VXUS - US9219097683 20.00% -
SC Schwab U.S. Large-Cap Growth ETF
SCHG - US8085243009 10.00% -
VV Vanguard Large-Cap Index Fund ETF Shares
VV - US9229086379 10.00%
The portfolio is predominantly composed of ETFs, with a strong emphasis on US equities, making up 80% of the allocation. The Vanguard S&P 500 ETF leads with 60%, followed by international exposure through the Vanguard Total International Stock Index Fund ETF at 20%. Such a composition aligns closely with typical benchmark compositions, which often prioritize US equities. This setup is beneficial for capturing the growth of the US market but could benefit from further diversification to mitigate regional risks. Consider balancing US exposure with more international assets to reduce potential regional volatility.
Growth
Historically, the portfolio has performed well, achieving a Compound Annual Growth Rate (CAGR) of 12.99%. This is a strong return, especially when compared to standard benchmark indices. However, it has experienced a maximum drawdown of -33.73%, indicating significant volatility during downturns. While past performance is promising, it's important to remember that historical data doesn't guarantee future results. To potentially smooth out volatility, consider incorporating more defensive or diversified assets that may perform differently during market stress.
Projection
Forward projections using Monte Carlo simulations suggest robust potential outcomes, with an annualized return of 14.09% across simulations. The 50th percentile projects a 416.93% return, indicating strong growth potential. However, simulations are based on historical data, which may not fully predict future conditions. While optimistic, these projections should be viewed with caution. To ensure preparedness for various market scenarios, consider stress-testing the portfolio under different economic conditions and adjusting allocations as needed.
Asset classes
- Stocks 100%
The portfolio is overwhelmingly invested in stocks, with a 99.52% allocation, leaving minimal exposure to other asset classes like cash or bonds. While this concentration can drive growth in bullish markets, it may expose the portfolio to higher risk during downturns. Common benchmarks often include a mix of asset classes to balance growth and stability. To enhance diversification, consider incorporating fixed-income or alternative assets, which can provide a buffer against market volatility and improve overall risk-adjusted returns.
Sectors
- Technology 30%
- Financials 14%
- Consumer Discretionary 11%
- Health Care 11%
- Telecommunications 9%
- Industrials 9%
- Consumer Staples 6%
- Energy 3%
- Basic Materials 3%
- Utilities 3%
- Real Estate 2%
Sector allocation reveals a significant concentration in technology at 30.48%, followed by financial services and consumer cyclicals. This sector composition aligns with many growth-oriented benchmarks but may lead to increased volatility, especially during economic shifts impacting these sectors. A balanced sector allocation can provide stability and reduce sector-specific risks. Consider evaluating current sector weights and exploring opportunities to diversify into underrepresented sectors, which may offer growth potential and reduce overall portfolio volatility.
Regions
- North America 81%
- Europe Developed 8%
- Asia Emerging 3%
- Japan 3%
- Asia Developed 2%
- Australasia 1%
- Africa/Middle East 1%
Geographically, the portfolio is heavily weighted towards North America, with 81.19% exposure. While this reflects a strong focus on the US market, it limits diversification and exposes the portfolio to regional risks. Common benchmarks often feature a more balanced geographic distribution. To mitigate potential risks from market-specific downturns, consider increasing exposure to other regions, particularly those with emerging growth opportunities, to enhance global diversification and capitalize on international market trends.
Redundant positions
-
High correlationSchwab U.S. Large-Cap Growth ETFVanguard S&P 500 ETFVanguard Large-Cap Index Fund ETF Shares
The portfolio contains highly correlated assets, particularly among US-focused ETFs, such as the Schwab U.S. Large-Cap Growth ETF and Vanguard S&P 500 ETF. High correlation suggests these assets move similarly, limiting diversification benefits. In market downturns, this can lead to amplified losses. To improve diversification, consider reducing overlap by selecting assets with lower correlation, potentially from different sectors or geographic regions, to achieve a more balanced risk profile and enhance portfolio resilience.
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 benefit from optimization using the Efficient Frontier, which seeks the best possible risk-return ratio. However, the presence of highly correlated assets limits diversification benefits. Before optimizing, consider addressing these overlaps, as removing or replacing them with less correlated assets can enhance efficiency. By reallocating within the current asset pool, the portfolio can achieve a more optimal balance, maximizing returns for a given level of risk without necessarily adding new assets.
Dividends
- Schwab U.S. Large-Cap Growth ETF 0.40%
- Vanguard S&P 500 ETF 1.20%
- Vanguard Large-Cap Index Fund ETF Shares 1.20%
- Vanguard Total International Stock Index Fund ETF Shares 3.40%
- Weighted yield (per year) 1.56%
The portfolio's dividend yield stands at 1.56%, with the highest contribution from the Vanguard Total International Stock Index Fund ETF at 3.4%. Dividends can provide a steady income stream and enhance total returns, especially in volatile markets. This yield aligns with moderate income-focused strategies. To potentially increase income, consider evaluating higher-yielding assets or dividend-focused funds, but be mindful of the trade-off between yield and growth potential, ensuring alignment with overall investment goals.
Ongoing product costs
- Schwab U.S. Large-Cap Growth ETF 0.04%
- Vanguard S&P 500 ETF 0.03%
- Vanguard Large-Cap Index Fund ETF Shares 0.04%
- Vanguard Total International Stock Index Fund ETF Shares 0.08%
- Weighted costs total (per year) 0.04%
Portfolio costs are impressively low, with a total expense ratio of 0.04%. This efficient cost structure supports better long-term performance by minimizing fees that can erode returns over time. Low-cost ETFs like those in the portfolio are advantageous for maintaining a cost-effective investment strategy. Continue to monitor and compare fund fees periodically to ensure they remain competitive. If any high-fee assets are introduced, consider alternatives that offer similar exposure at a lower cost to maintain this efficient cost structure.
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