Growth-focused US-centric portfolio with high concentration in technology sector
Report created on Feb 8, 2025Risk profile
5/7
Diversification profile
2/5
Positions
-
SP SPDR® Portfolio S&P 500 ETF
SPLG - US78464A8541 65.00% -
SC Schwab U.S. Large-Cap Growth ETF
SCHG - US8085243009 20.00% -
NV NVIDIA Corporation
NVDA - US67066G1040 10.00% -
AV Avantis® U.S. Small Cap Value ETF
AVUV - US0250728773 5.00%
This portfolio is heavily weighted towards large-cap US equities, with a significant 65% allocation to the SPDR® Portfolio S&P 500 ETF and 20% to the Schwab U.S. Large-Cap Growth ETF. A 10% allocation to NVIDIA Corporation further emphasizes its growth focus. The remaining 5% is in the Avantis® U.S. Small Cap Value ETF, offering some diversification. Compared to a typical balanced portfolio, this one is less diversified, concentrating primarily on large-cap growth stocks. While this composition may capture significant growth during bull markets, it may also expose the portfolio to higher volatility during downturns.
Growth
Historically, this portfolio has demonstrated a robust Compound Annual Growth Rate (CAGR) of 24.09%, significantly outperforming typical benchmarks. However, it also experienced a maximum drawdown of -38.36%, indicating substantial volatility. This suggests that while the portfolio has delivered strong returns, it has also faced periods of significant decline. Such performance highlights the importance of balancing high returns with risk management strategies to mitigate potential losses during market downturns. Investors should remain aware that past performance does not guarantee future results, especially in a volatile market environment.
Projection
The Monte Carlo simulation, which uses historical data to project future outcomes, suggests a wide range of potential returns for this portfolio. With 1,000 simulations, the median projection shows a 5,892.9% return, while the optimistic 67th percentile projects a 10,239.3% return. However, the 5th percentile indicates a much lower potential return of 566.4%. These projections illustrate the inherent uncertainty in future market conditions and the potential for both substantial gains and losses. Investors should use these projections as a guide rather than a guarantee, considering their own risk tolerance and investment goals.
Asset classes
- Stocks 100%
The portfolio is entirely composed of stocks, with no allocation to cash or bonds, which might limit its diversification. While this all-equity approach can maximize growth potential, it also increases exposure to market volatility. In contrast, a more diversified portfolio would typically include a mix of asset classes, such as fixed income or cash, to help stabilize returns during market fluctuations. Investors may consider diversifying into other asset classes to reduce risk and improve the portfolio's resilience in various market conditions.
Sectors
- Technology 42%
- Financials 11%
- Consumer Discretionary 11%
- Telecommunications 9%
- Health Care 9%
- Industrials 6%
- Consumer Staples 4%
- Energy 3%
- Utilities 2%
- Basic Materials 2%
- Real Estate 1%
The portfolio is heavily concentrated in the technology sector, which comprises 42% of the total allocation. This concentration can lead to higher volatility, especially during periods of market uncertainty or interest rate hikes. Other sectors like financial services and consumer cyclicals each hold an 11% allocation, providing some balance. However, the low exposure to defensive sectors such as utilities and consumer defensives may leave the portfolio vulnerable to economic downturns. Investors should assess whether this sectoral exposure aligns with their risk tolerance and consider rebalancing if necessary.
Regions
- North America 100%
Geographically, the portfolio is entirely focused on North America, with no exposure to international markets. While this reflects a strong belief in the US market's potential, it also limits diversification and exposes the portfolio to regional risks. Diversifying across different geographic regions can help mitigate risks associated with economic or political events in a single area. Investors might consider incorporating international equities to achieve a more balanced global exposure, potentially enhancing returns and reducing risk.
Market capitalization
- Mega-cap 54%
- Large-cap 27%
- Mid-cap 14%
- Small-cap 3%
- Micro-cap 2%
The portfolio's allocation by market capitalization is heavily tilted towards mega-cap stocks, which make up 54% of the portfolio. Big-cap stocks account for 27%, while medium, small, and micro caps comprise 14%, 3%, and 2%, respectively. This skew towards larger companies may offer stability and lower volatility compared to smaller caps, but it also reduces exposure to potentially higher growth opportunities in smaller companies. Investors seeking to balance risk and growth might consider increasing their allocation to small and medium-cap stocks.
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 be optimized using the Efficient Frontier, which seeks the best possible risk-return ratio based on current assets. By adjusting allocations, investors may achieve better diversification and risk management. The Efficient Frontier does not consider adding new assets but focuses on reallocating existing ones for optimal efficiency. Investors should evaluate their risk tolerance and investment goals to determine if rebalancing within the current asset mix could enhance their portfolio's performance.
Dividends
- Avantis® U.S. Small Cap Value ETF 1.60%
- Schwab U.S. Large-Cap Growth ETF 0.40%
- SPDR® Portfolio S&P 500 ETF 1.20%
- Weighted yield (per year) 0.94%
The portfolio's dividend yield is relatively modest at 0.94%, reflecting its focus on growth rather than income generation. While dividends can provide a steady income stream and contribute to total returns, growth-oriented portfolios typically prioritize capital appreciation. Investors seeking higher income might explore adding dividend-focused investments to their portfolio. However, those primarily focused on growth may find the current yield acceptable, provided they are comfortable with the associated risks and potential for capital gains.
Ongoing product costs
- Avantis® U.S. Small Cap Value ETF 0.25%
- Schwab U.S. Large-Cap Growth ETF 0.04%
- SPDR® Portfolio S&P 500 ETF 0.02%
- Weighted costs total (per year) 0.03%
The portfolio benefits from impressively low costs, with a total expense ratio (TER) of 0.03%. This low-cost structure supports better long-term performance by minimizing the drag on returns. The SPDR® Portfolio S&P 500 ETF and Schwab U.S. Large-Cap Growth ETF, with TERs of 0.02% and 0.04% respectively, are particularly cost-effective. Maintaining low costs is a key advantage in maximizing investment returns over time. Investors should continue to monitor expense ratios and prioritize low-cost options to enhance overall portfolio efficiency.
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