A growth-focused portfolio with strong tech exposure and limited geographic diversity

Report created on Jan 4, 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 weighted towards equities, with a significant 50% allocation to the Vanguard S&P 500 ETF. The remaining investments are spread across a mix of large-cap growth, small-cap value, dividend equity, and semiconductor-focused ETFs. This composition suggests a growth-oriented strategy, but with low diversification as it is concentrated in a few key areas. Compared to a typical balanced portfolio, this one lacks exposure to bonds or other asset classes, which could provide stability during market downturns. To enhance diversification, consider incorporating additional asset classes like bonds or international equities.

Growth Info

Historically, this portfolio has delivered strong performance, with a Compound Annual Growth Rate (CAGR) of 15.59%. However, it experienced a maximum drawdown of -34.31%, indicating significant volatility. This performance is impressive, but it's important to remember that past results do not guarantee future returns. The high returns are likely due to the portfolio's heavy allocation to growth-oriented equities, particularly in the technology sector. To mitigate potential future volatility, consider gradually reallocating a portion of the portfolio into less volatile investments like fixed income or defensive sectors.

Projection Info

The Monte Carlo simulation, which uses historical data to project future outcomes, suggests a wide range of potential returns. With a 50th percentile outcome of over 732% and a 67th percentile exceeding 1,087%, the portfolio has a strong potential for growth. However, it's crucial to note that these projections are based on past data and do not account for unforeseen market conditions. The simulation shows high volatility, with 991 out of 1,000 simulations yielding positive returns. To better manage risk, consider diversifying into less correlated assets, which could stabilize returns over time.

Asset classes Info

  • Stocks
    100%

The portfolio is overwhelmingly composed of equities, making up 99.67% of the total allocation. This heavy reliance on stocks suggests a high-risk, high-reward strategy typical of growth-focused portfolios. While equities can offer significant returns, they also expose the portfolio to market volatility. Compared to a well-diversified benchmark, this portfolio lacks exposure to asset classes like bonds and alternatives, which could provide a buffer during market downturns. Incorporating a broader range of asset classes could help balance risk and improve long-term stability.

Sectors Info

  • Technology
    36%
  • Financials
    13%
  • Consumer Discretionary
    10%
  • Health Care
    9%
  • Industrials
    8%
  • Telecommunications
    7%
  • Consumer Staples
    5%
  • Energy
    4%
  • Real Estate
    3%
  • Basic Materials
    2%
  • Utilities
    2%

The portfolio is heavily concentrated in the technology sector, accounting for over 35% of the total allocation. While this sector has driven substantial growth, it also introduces higher volatility, especially during periods of interest rate hikes or regulatory changes. Other sectors like financial services and consumer cyclicals are also represented but to a lesser extent. A more balanced sectoral allocation could reduce risk and align better with broader market benchmarks. Consider increasing exposure to underrepresented sectors such as utilities or healthcare to enhance stability and diversification.

Regions Info

  • North America
    97%
  • Asia Developed
    1%
  • Europe Developed
    1%

Geographically, the portfolio is predominantly focused on North America, with 97.31% of assets allocated there. This concentration limits exposure to international markets, which could provide diversification benefits and reduce geopolitical risk. Compared to global benchmarks, this portfolio underrepresents regions like Europe and Asia, which can offer growth opportunities and reduce reliance on the U.S. market. To achieve better geographic diversification, consider adding international equities or funds that focus on emerging markets.

Redundant positions Info

  • Schwab U.S. Large-Cap Growth ETF
    Vanguard S&P 500 ETF
    High correlation

The portfolio's assets, particularly the Schwab U.S. Large-Cap Growth ETF and the Vanguard S&P 500 ETF, are highly correlated. This means they tend to move together, reducing the diversification benefits. During market downturns, highly correlated assets may all decline simultaneously, increasing overall portfolio risk. To enhance diversification, consider reducing exposure to overlapping investments and introducing assets with lower correlations, such as international stocks or alternative investments, which can help stabilize 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.

To optimize risk versus return, consider adjustments using the Efficient Frontier concept, which identifies the best possible risk-return ratio for a given set of assets. This portfolio can be optimized by reducing exposure to highly correlated assets and reallocating towards less correlated and potentially more diversified ones. This approach focuses on achieving the highest expected return for a given level of risk, rather than simply diversifying across sectors or asset classes. It is important to note that optimization is based on current assets and does not guarantee improved performance.

Dividends Info

  • Schwab U.S. Dividend Equity ETF 3.60%
  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • Vanguard Small-Cap Value Index Fund ETF Shares 1.40%
  • Vanguard S&P 500 ETF 1.20%
  • Weighted yield (per year) 1.23%

The portfolio's overall dividend yield stands at 1.23%, with the Schwab U.S. Dividend Equity ETF contributing the highest yield at 3.6%. While dividends can provide a steady income stream, this portfolio's yield is relatively modest due to its focus on growth-oriented equities. For investors seeking income, increasing allocation to higher-yielding assets could be beneficial. However, for a growth-focused strategy, maintaining a balance that prioritizes capital appreciation over income could be more aligned with long-term goals.

Ongoing product costs Info

  • Schwab U.S. Dividend Equity ETF 0.06%
  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • VanEck Semiconductor ETF 0.35%
  • Vanguard Small-Cap Value Index Fund ETF Shares 0.07%
  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.07%

The portfolio's total expense ratio (TER) is impressively low at 0.07%, which is advantageous for long-term performance. Lower costs mean more of your investment returns are retained, compounding over time. Among the holdings, the VanEck Semiconductor ETF has the highest individual cost at 0.35%, which might be an area to review for cost-saving opportunities. Overall, maintaining low costs is a strength of this portfolio, but it's always worth evaluating whether similar, lower-cost alternatives could replace higher-fee holdings without compromising strategy.

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