A concentrated growth-focused portfolio with high U.S. large-cap exposure and limited diversification

Report created on Mar 6, 2025

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

The portfolio is composed of two ETFs: Schwab U.S. Large-Cap Growth ETF (70%) and Vanguard S&P 500 ETF (30%). This structure heavily leans towards U.S. large-cap stocks, emphasizing growth. Compared to a typical balanced portfolio, it has a low diversification score, indicating a strong concentration in a single asset class. Such concentration can lead to higher volatility, especially during market downturns. To enhance diversification, consider incorporating additional asset classes, such as bonds or international equities, which can provide a buffer against U.S. market fluctuations.

Growth Info

A hypothetical initial investment in this portfolio would have experienced a CAGR of 15.64%, indicating strong historical growth. However, it also faced a maximum drawdown of -32.87%, highlighting its potential volatility. Compared to market benchmarks, the portfolio's performance is commendable, although the high drawdown suggests a need for caution. While past performance is not predictive of future results, it can offer insights into how the portfolio might react in similar market conditions. Diversifying further could help mitigate such drawdowns in the future.

Projection Info

Monte Carlo simulations, which use historical data to estimate potential future outcomes, show a wide range of results for this portfolio. The median projection suggests significant growth, with the 50th percentile reaching a 544.7% increase. However, the 5th percentile is only slightly positive, indicating possible downside risks. While Monte Carlo analysis provides a probabilistic view, it's important to remember that it cannot predict the future with certainty. To prepare for various scenarios, consider stress-testing the portfolio under different market conditions.

Asset classes Info

  • Stocks
    100%

With a 100% allocation to stocks, the portfolio lacks diversification across asset classes. This singular focus on equities can lead to higher volatility and risk, particularly in turbulent markets. A more diversified portfolio typically includes a mix of asset classes, such as bonds or real estate, to balance potential risks and returns. Consider introducing other asset classes to reduce overall portfolio risk and enhance long-term stability.

Sectors Info

  • Technology
    43%
  • Consumer Discretionary
    13%
  • Telecommunications
    12%
  • Health Care
    10%
  • Financials
    9%
  • Industrials
    4%
  • Consumer Staples
    3%
  • Basic Materials
    2%
  • Energy
    2%
  • Utilities
    1%
  • Real Estate
    1%

The portfolio is heavily weighted towards the technology sector at 43%, with consumer cyclicals and communication services also having significant allocations. This sector concentration may result in increased sensitivity to tech market fluctuations, especially during interest rate changes. A more balanced sector allocation could help mitigate sector-specific risks and improve overall stability. Reviewing sector trends and adjusting allocations accordingly can enhance resilience against market shifts.

Regions Info

  • North America
    100%

With a 100% exposure to North America, the portfolio lacks geographic diversification. This concentration increases vulnerability to regional economic downturns or policy changes. In contrast, a geographically diversified portfolio can better withstand local market volatility. Consider expanding into international markets to capture global growth opportunities and reduce reliance on the U.S. economy. This approach can also provide exposure to different currency dynamics and economic cycles.

Market capitalization Info

  • Mega-cap
    59%
  • Large-cap
    26%
  • Mid-cap
    14%
  • Small-cap
    1%

The portfolio's market capitalization is predominantly in mega-cap stocks (59%), with minimal exposure to small-cap companies. While mega-cap stocks offer stability and established growth, small-cap stocks can provide higher growth potential and diversification benefits. A more balanced market cap distribution could enhance the portfolio's risk-return profile by capturing growth across different company sizes. Consider adjusting allocations to include more mid- and small-cap stocks to diversify further.

Redundant positions Info

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

The portfolio's assets are highly correlated, with both ETFs moving closely together. This correlation limits diversification benefits, as both ETFs react similarly to market changes. In downturns, this could lead to amplified losses. To improve diversification, consider incorporating assets with lower correlation, such as international equities or fixed-income securities. This strategy can help reduce overall portfolio volatility and enhance risk management.

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 benefit from optimization using the Efficient Frontier, which seeks the best possible risk-return ratio. Currently, the high correlation between assets suggests limited diversification benefits. By adjusting the asset allocation, the portfolio can potentially achieve a more favorable risk-return profile. This optimization would focus on reallocating within existing assets to enhance efficiency, without necessarily expanding into new sectors or regions. Regular reviews and adjustments can ensure the portfolio remains aligned with optimal risk-return principles.

Dividends Info

  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • Vanguard S&P 500 ETF 1.30%
  • Weighted yield (per year) 0.67%

The portfolio's dividend yield is relatively low at 0.67%, reflecting its focus on growth rather than income. While dividends can provide steady cash flow, a growth-focused portfolio prioritizes capital appreciation. For investors seeking income, incorporating higher-yielding assets could be beneficial. However, if growth is the primary goal, maintaining the current allocation may be appropriate. Regularly reviewing dividend policies and yields can ensure alignment with investment objectives.

Ongoing product costs Info

  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.04%

With an impressive total expense ratio (TER) of 0.04%, the portfolio's costs are minimal, supporting better long-term returns. Low costs are crucial for maximizing net returns, as they reduce the drag on performance. This alignment with low-cost investment principles is commendable. To maintain cost efficiency, continue monitoring expense ratios and consider cost-effective alternatives, if available. This focus on minimizing costs can enhance overall portfolio performance over time.

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