A growth-focused portfolio with a strong emphasis on large-cap equities and technology assets

Report created on Dec 30, 2024

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

The portfolio is heavily weighted towards equities, with 89.75% in stocks and only 9.26% in bonds. This composition is typical for a growth-oriented portfolio, which aims to maximize returns through capital appreciation. The significant allocation to large-cap ETFs, like the Vanguard S&P 500 ETF and Schwab U.S. Large-Cap Growth ETF, indicates a preference for stability and potential growth offered by established companies. While this structure supports growth, it may expose the portfolio to higher volatility compared to more diversified allocations. Consider introducing more fixed-income securities or diversifying with alternative assets to balance risk and potential returns.

Growth Info

Historically, the portfolio has performed impressively with a CAGR of 17.19%, significantly outpacing many benchmarks. However, it also experienced a maximum drawdown of -31.22%, highlighting potential volatility. This performance suggests that while the portfolio is capable of substantial growth, it may also be susceptible to market downturns. It's important to remember that past performance doesn't guarantee future results. To potentially reduce drawdowns, consider adding more defensive assets or diversifying into sectors that historically perform well during downturns.

Projection Info

Monte Carlo simulations, which use historical data to estimate future returns, project a median portfolio growth of 455.22% over the investment horizon. While 978 out of 1,000 simulations showed positive returns, it's crucial to understand that these projections are based on historical trends and assumptions. They do not account for unforeseen market events or changes in economic conditions. To improve the robustness of these projections, ensure the portfolio is well-diversified across various asset classes and sectors, reducing reliance on any single outcome.

Asset classes Info

  • Stocks
    90%
  • Bonds
    9%
  • Cash
    1%

The portfolio's asset allocation is heavily skewed towards stocks, with minimal exposure to bonds and other asset classes. This concentration in equities aligns with a growth strategy but may increase risk, especially during market downturns. Compared to typical balanced portfolios, which might have a more even distribution between stocks and bonds, this allocation suggests a higher risk tolerance. To enhance diversification and potentially reduce volatility, consider increasing the bond allocation or exploring other asset classes like real estate or commodities.

Sectors Info

  • Technology
    37%
  • Financials
    10%
  • Consumer Discretionary
    10%
  • Health Care
    8%
  • Telecommunications
    7%
  • Industrials
    6%
  • Consumer Staples
    3%
  • Energy
    3%
  • Basic Materials
    3%
  • Utilities
    1%
  • Real Estate
    1%

The portfolio shows a notable concentration in the technology sector, accounting for nearly 37% of the allocation. This focus can drive significant growth during tech booms but may also lead to heightened volatility, especially during periods of regulatory scrutiny or market corrections. Other sectors like financial services and consumer cyclicals provide some balance, but the overall sector exposure is less diversified than typical benchmarks. To mitigate sector-specific risks, consider diversifying into underrepresented sectors, which could provide stability and potential growth opportunities.

Regions Info

  • North America
    81%
  • Europe Developed
    4%
  • Japan
    2%
  • Asia Emerging
    1%
  • Australasia
    1%
  • Asia Developed
    1%

Geographically, the portfolio is predominantly invested in North America, with 80.5% exposure. This concentration can limit the benefits of global diversification, potentially increasing vulnerability to regional economic downturns. While there is some exposure to developed Europe and Japan, emerging markets are notably underrepresented. To enhance geographic diversification and capture growth from different economic cycles, consider increasing allocations to emerging markets or other underrepresented regions, which may offer higher growth potential and diversification benefits.

Redundant positions Info

  • Schwab U.S. Large-Cap Growth ETF
    Vanguard Information Technology Index Fund ETF Shares
    High correlation

The portfolio contains highly correlated assets, particularly between the Schwab U.S. Large-Cap Growth ETF and the Vanguard Information Technology Index Fund ETF Shares. High correlation means these assets tend to move in tandem, which can limit diversification benefits and increase risk during market downturns. While correlation is not inherently negative, it can reduce the portfolio's ability to weather market volatility. To improve diversification, consider replacing one of the correlated assets with a less correlated alternative, potentially enhancing risk-adjusted 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.

The portfolio's current allocation could potentially be optimized using the Efficient Frontier, which identifies the best possible risk-return ratio. However, before optimizing, focus on reducing overlap between highly correlated assets, as these do not contribute to diversification. The goal is to achieve a more efficient allocation by adjusting weights among existing assets, improving the overall risk-return profile. Keep in mind that optimization is based on historical data and assumptions, which may not fully predict future market conditions.

Dividends Info

  • Avantis® International Small Cap Value ETF 4.30%
  • Avantis® U.S. Small Cap Value ETF 1.60%
  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • iShares 0-5 Year TIPS Bond ETF 2.20%
  • Vanguard Information Technology Index Fund ETF Shares 0.60%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total International Stock Index Fund ETF Shares 3.30%
  • Weighted yield (per year) 1.28%

The overall dividend yield of the portfolio is 1.28%, which is relatively low for income-focused investments but typical for growth-oriented portfolios. Dividend yields from the Avantis International Small Cap Value ETF and Vanguard Total International Stock Index Fund ETF Shares offer some income, but the primary focus remains on capital appreciation. If generating income is a priority, consider increasing exposure to higher-yielding dividend stocks or ETFs. However, ensure this aligns with your overall investment strategy and risk tolerance.

Ongoing product costs Info

  • Avantis® International Small Cap Value ETF 0.36%
  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • iShares 0-5 Year TIPS Bond ETF 0.03%
  • Vanguard Information Technology Index Fund ETF Shares 0.10%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.07%

With a Total Expense Ratio (TER) of 0.07%, the portfolio is cost-efficient, supporting better long-term returns by minimizing the drag from fees. Low costs are crucial for maximizing net returns, particularly in a growth portfolio where compounding can have a significant impact over time. While the costs are impressively low, it's always worthwhile to periodically review the expense ratios of individual holdings. Consider replacing any higher-cost funds with lower-cost alternatives if they offer similar exposure and performance.

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