High Risk Growth Portfolio with Low Diversification and Strong Focus on U.S. Large-Cap Stocks

Risk profile

  • Secure
    Speculative

The risk profile, derived from past market volatility, reflects the level of risk the portfolio is exposed to. This assessment helps align your investments with your financial goals and comfort with market fluctuations.

Diversification profile

  • Focused
    Diversified

The diversification assessment evaluates the spread of investments across asset classes, regions, and sectors. This ensures a balanced mix, reducing risk and maximizing returns by not concentrating in any single area.

What type of investor this portfolio is suitable for

Growth Investors

This portfolio is suitable for an investor with a high-risk tolerance, seeking aggressive growth and willing to accept significant volatility. It is ideal for those with a long investment horizon, aiming to capitalize on market upswings. Such an investor is likely focused on capital appreciation rather than income generation. They should be comfortable with the potential for substantial drawdowns and have the patience to weather market fluctuations, understanding that higher risk can lead to higher returns over time.

Positions

  • Schwab U.S. Large-Cap Growth ETF
    SCHG - US8085243009
    49.00%
  • Vanguard S&P 500 ETF
    VOO - US9229083632
    28.00%
  • Schwab U.S. Dividend Equity ETF
    SCHD - US8085247976
    15.45%
  • Vanguard Total Stock Market Index Fund ETF Shares
    VTI - US9229087690
    3.38%
  • Schwab International Equity ETF
    SCHF - US8085248057
    2.42%
  • Schwab U.S. Small-Cap ETF
    SCHA - US8085246077
    1.75%

The portfolio is heavily weighted towards U.S. large-cap stocks, with almost half of the assets in the Schwab U.S. Large-Cap Growth ETF. This indicates a strong focus on growth potential. However, the diversification is quite low, with limited exposure to international markets and other asset classes. This composition may lead to higher volatility and risk. To enhance diversification, consider adding more varied asset classes and international exposure, which could potentially stabilize returns and reduce risk.

Growth Info

Historically, this portfolio has shown an impressive compound annual growth rate (CAGR) of 15.2%, which suggests strong past performance. However, it has also experienced a significant maximum drawdown of -33.14%, indicating vulnerability during market downturns. The portfolio's returns are concentrated in a small number of days, highlighting its reliance on market timing. To mitigate risk, a more balanced allocation could be beneficial, potentially smoothing out returns and reducing the impact of market volatility.

Projection Info

Using a Monte Carlo simulation with 1,000 iterations, the portfolio's future performance was projected. The simulation shows a wide range of potential outcomes, with an annualized return of 14.13%. The 5th percentile indicates a 66.41% return, while the 67th percentile suggests a 603.56% return. This variability underscores the high-risk nature of the portfolio. To achieve more predictable outcomes, consider diversifying investments to include lower volatility assets, which could help in managing risk and achieving long-term goals.

Asset classes

  • Stocks
    100%
  • Cash
    0%
  • Bonds
    0%
  • Other
    0%
  • No data
    0%

The portfolio is overwhelmingly composed of stocks, accounting for 99.9% of the allocation. This heavy reliance on equities suggests a high-risk, high-reward strategy. While stocks can offer substantial growth, they also come with significant volatility. Introducing other asset classes, such as bonds or real estate, could provide stability and reduce overall portfolio risk. A more balanced asset allocation can help in achieving a smoother return profile and protect against market downturns.

Sectors

  • Technology
    36%
  • Health Care
    12%
  • Financials
    12%
  • Consumer Discretionary
    11%
  • Telecommunications
    10%
  • Industrials
    7%
  • Consumer Staples
    5%
  • Energy
    4%
  • Basic Materials
    2%
  • Utilities
    1%
  • Real Estate
    1%

The portfolio's sector allocation is heavily skewed towards technology, which makes up over 36% of the portfolio. This concentration can lead to increased risk, particularly if the tech sector faces a downturn. Other sectors like healthcare, financial services, and consumer cyclicals have moderate representation. To mitigate sector-specific risks, consider diversifying across a broader range of industries. A more balanced sector allocation can help in reducing volatility and enhancing the portfolio's resilience to market changes.

Regions

  • North America
    97%
  • Europe Developed
    2%
  • Japan
    1%
  • Asia Developed
    0%
  • Australasia
    0%
  • Latin America
    0%
  • Africa/Middle East
    0%
  • Europe Emerging
    0%
  • Asia Emerging
    0%

Geographically, the portfolio is primarily focused on North America, with 97.4% of the assets allocated there. This lack of international exposure limits potential growth opportunities and increases vulnerability to regional economic downturns. Expanding geographic diversification by including more international markets could enhance growth potential and reduce risk. A broader geographic allocation can provide access to different economic cycles and growth drivers, potentially leading to more stable returns.

Redundant positions

  • Schwab U.S. Dividend Equity ETF
    Schwab U.S. Small-Cap ETF
    Vanguard Total Stock Market Index Fund ETF Shares
    Schwab U.S. Large-Cap Growth ETF
    Vanguard S&P 500 ETF
    High correlation

The portfolio shows high correlation among its assets, particularly among U.S.-focused ETFs like the Schwab U.S. Dividend Equity ETF and Vanguard S&P 500 ETF. This correlation can amplify risk during market downturns, as assets tend to move in the same direction. To achieve better diversification, consider including assets with lower correlation, which can help in reducing overall portfolio volatility. A diversified portfolio with low-correlated assets can provide a smoother ride through market fluctuations.

Dividends

  • Schwab U.S. Small-Cap ETF 2.40%
  • Schwab U.S. Dividend Equity ETF 3.40%
  • Schwab International Equity ETF 3.70%
  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Weighted yield (per year) 1.23%

The portfolio's overall dividend yield stands at 1.23%, with the Schwab International Equity ETF offering the highest yield at 3.7%. While dividends can provide a steady income stream, the portfolio's yield is relatively low, reflecting its growth-oriented strategy. For investors seeking income, increasing exposure to higher-yielding assets could enhance cash flow. Balancing growth and income strategies could provide a more comprehensive approach, catering to both capital appreciation and regular income needs.

Ongoing product costs

  • Schwab U.S. Small-Cap ETF 0.04%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • Schwab International Equity ETF 0.06%
  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Weighted costs total (per year) 0.04%

The portfolio's total expense ratio (TER) is impressively low at 0.04%, indicating cost-efficiency. Low costs can significantly impact long-term returns, allowing more of the portfolio's gains to compound over time. Keeping investment costs minimal is a sound strategy, but it's also crucial to ensure that cost savings don't compromise diversification or risk management. Maintaining a focus on cost-effective investments while exploring additional diversification opportunities could enhance overall portfolio performance.

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.

Portfolio optimization involves finding the efficient frontier, where the highest expected return is achieved for a given level of risk. Currently, the portfolio's high correlation and low diversification suggest it is not on the efficient frontier. Enhancing diversification across asset classes, sectors, and geographies could move the portfolio closer to optimal efficiency. This would involve balancing risk and return more effectively, potentially leading to better long-term performance without unnecessary risk exposure.

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