A concentrated portfolio with high growth potential but limited diversification and high risk
Report created on Jan 1, 2025Risk profile
5/7
Diversification profile
2/5
Positions
-
SC Schwab U.S. Large-Cap Growth ETF
SCHG - US8085243009 100.00%
This portfolio is entirely invested in the Schwab U.S. Large-Cap Growth ETF, which represents a single asset class—stocks. This lack of diversification is notable, as it contrasts with common benchmark compositions that typically include a mix of asset classes like bonds and real estate. While focusing on a single ETF can simplify management, it also increases exposure to market volatility. For improved balance, consider diversifying across different asset classes to reduce risk and enhance stability.
Growth
Historically, the portfolio has performed well, achieving a Compound Annual Growth Rate (CAGR) of 17.82%. This impressive growth rate indicates strong past performance, particularly when compared to broader market benchmarks. However, it's crucial to note the significant max drawdown of -34.61%, which highlights potential volatility. While past performance is encouraging, it doesn't guarantee future results. Monitoring market conditions and adjusting the portfolio to manage risks could help maintain growth.
Projection
The Monte Carlo simulation projects potential future outcomes based on historical data, indicating an annualized return of 19.41%. With 999 out of 1,000 simulations showing positive returns, the outlook appears optimistic. However, these projections rely on past data and can be impacted by unforeseen market changes. While the median projection suggests substantial growth, it's wise to remain cautious and consider incorporating more conservative assets to mitigate potential downturns.
Asset classes
- Stocks 100%
The portfolio is heavily weighted in stocks, with only a negligible amount in cash. Such a concentration in a single asset class limits diversification and increases exposure to stock market fluctuations. Diversification across asset classes can help manage risk and improve resilience against market downturns. Consider exploring fixed-income securities or alternative investments to achieve a more balanced allocation and reduce reliance on equities.
Sectors
- Technology 48%
- Consumer Discretionary 14%
- Telecommunications 13%
- Health Care 10%
- Financials 7%
- Industrials 3%
- Consumer Staples 2%
- Basic Materials 2%
- Energy 1%
- Utilities 1%
- Real Estate 1%
The portfolio is heavily concentrated in the technology sector, which comprises nearly half of the holdings. While this can drive growth, it also exposes the portfolio to sector-specific risks, such as regulatory changes or technological disruptions. A more balanced sector allocation can enhance stability and reduce the impact of adverse sector trends. Consider gradually reallocating some assets to underrepresented sectors to achieve a more diversified sectoral composition.
Regions
- North America 100%
With nearly all assets allocated to North America, the portfolio lacks geographic diversification. This concentration can increase vulnerability to regional economic downturns or geopolitical events. Benchmark portfolios often include a mix of global equities to reduce such risks. Expanding geographic exposure by investing in international markets could provide additional growth opportunities and improve overall diversification.
Dividends
- Schwab U.S. Large-Cap Growth ETF 0.40%
- Weighted yield (per year) 0.40%
The Schwab U.S. Large-Cap Growth ETF offers a modest dividend yield of 0.4%, which contributes marginally to overall returns. While dividend income is not a primary focus for growth-oriented portfolios, it can offer some stability during volatile periods. For investors seeking higher income, exploring dividend-focused investments could be beneficial. Balancing growth with income-generating assets may enhance the portfolio's resilience and support long-term goals.
Ongoing product costs
- Schwab U.S. Large-Cap Growth ETF 0.04%
- Weighted costs total (per year) 0.04%
The portfolio's total expense ratio is impressively low at 0.04%, which is beneficial for long-term performance. Low costs mean more of the portfolio's returns are retained by the investor, enhancing compounding effects over time. This cost efficiency aligns well with best practices and supports the portfolio's growth objectives. Maintaining a focus on low-cost investments is advisable to continue maximizing net returns.
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