A growth-focused portfolio with concentrated U.S. exposure and low diversification

Report created on Mar 22, 2025

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

This portfolio is heavily concentrated in U.S. large-cap growth stocks, with a significant portion allocated to the Schwab U.S. Large-Cap Growth ETF. The remainder is split between the SPDR® Portfolio S&P 500 ETF and the Schwab U.S. Dividend Equity ETF. This composition leans towards growth-oriented equities, with minimal exposure to other asset classes. A more diversified portfolio might include bonds or international equities to reduce risk. Adjusting the asset allocation could provide a better balance between growth and stability, aligning with broader market benchmarks.

Growth Info

Historically, this portfolio has delivered a robust CAGR of 15.00%, outperforming many traditional benchmarks. However, it also experienced a significant maximum drawdown of -32.84%, indicating vulnerability during market downturns. This high volatility reflects the growth-oriented nature of the portfolio. While past performance is not indicative of future results, maintaining a performance review is crucial. Consider incorporating defensive assets to mitigate potential downturn risks and stabilize returns over time.

Projection Info

Monte Carlo simulations, which use historical data to forecast potential future outcomes, suggest a range of possible returns for this portfolio. With 1,000 simulations, the median (50th percentile) projection shows substantial growth, while the 5th percentile indicates potential for loss. Although 997 simulations resulted in positive returns, it's essential to note that simulations rely on past data and cannot predict future market conditions precisely. Regularly reviewing and adjusting the portfolio can help align with evolving financial goals and risk tolerance.

Asset classes Info

  • Stocks
    100%

The portfolio is exclusively invested in stocks, which limits diversification and increases risk exposure. While stocks offer growth potential, they also carry higher volatility compared to bonds and other asset classes. Incorporating a mix of asset classes, such as bonds or real estate, could enhance diversification and provide a cushion during market fluctuations. This strategy could align the portfolio more closely with benchmark norms, which typically include a broader range of asset classes.

Sectors Info

  • Technology
    37%
  • Health Care
    12%
  • Consumer Discretionary
    11%
  • Financials
    11%
  • Telecommunications
    11%
  • Industrials
    6%
  • Consumer Staples
    5%
  • Energy
    3%
  • Basic Materials
    2%
  • Utilities
    1%
  • Real Estate
    1%

The portfolio's sector allocation is heavily weighted towards technology, which comprises 37% of the total. While tech stocks can drive growth, they are also susceptible to volatility, especially during interest rate changes. Other sectors, such as healthcare and consumer cyclicals, offer some balance but are underrepresented compared to benchmarks. Diversifying across more sectors could mitigate sector-specific risks and provide a more stable return profile. Consider rebalancing to achieve a more even sector distribution.

Regions Info

  • North America
    100%

The portfolio's geographic allocation is entirely focused on North America, with no exposure to international markets. This lack of geographic diversification increases susceptibility to regional economic downturns. Including international equities, particularly from emerging markets, could enhance diversification and capture growth opportunities outside North America. Aligning with global benchmarks typically involves a more balanced geographic spread, reducing reliance on a single region's performance.

Market capitalization Info

  • Mega-cap
    48%
  • Large-cap
    33%
  • Mid-cap
    16%
  • Small-cap
    2%

The portfolio's market capitalization distribution is skewed towards mega and big-cap stocks, which account for 81% of the total. While large-cap stocks provide stability and liquidity, they may limit growth potential compared to smaller companies. Including more mid and small-cap stocks could enhance growth prospects and diversification. This adjustment can provide exposure to different market dynamics, potentially improving risk-adjusted returns over time.

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 risk-return profile can potentially be optimized using the Efficient Frontier, a concept that identifies the best possible risk-return ratio. However, this optimization is limited to the current assets and their allocations. Adjusting allocations between existing holdings could enhance efficiency without adding new assets. While the portfolio is growth-focused, balancing risk and return through optimization can improve resilience against market fluctuations. Regularly reviewing the portfolio's position on the Efficient Frontier ensures alignment with investment goals.

Dividends Info

  • Schwab U.S. Dividend Equity ETF 2.80%
  • Schwab U.S. Large-Cap Growth ETF 0.30%
  • SPDR® Portfolio S&P 500 ETF 1.00%
  • Weighted yield (per year) 0.90%

With a total dividend yield of 0.90%, the portfolio's income generation is modest, primarily driven by the Schwab U.S. Dividend Equity ETF. While dividends provide a steady income stream, they are not the primary focus of this growth-oriented portfolio. Investors seeking higher income might consider increasing the allocation to dividend-paying stocks or funds. Balancing growth and income can enhance the portfolio's appeal to income-focused investors while maintaining growth potential.

Ongoing product costs Info

  • Schwab U.S. Dividend Equity ETF 0.06%
  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • SPDR® Portfolio S&P 500 ETF 0.02%
  • Weighted costs total (per year) 0.04%

The portfolio benefits from impressively low costs, with a total expense ratio (TER) of just 0.04%. Low costs contribute to better long-term returns by minimizing the drag on performance. This efficiency aligns well with best practices, ensuring more of the investment returns are retained. While costs are already optimized, maintaining this advantage requires regular monitoring of fund fees and exploring cost-effective alternatives if necessary. Keeping costs low is a key component of a successful investment strategy.

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