A highly concentrated portfolio with a strong focus on large-cap U.S. equities

Report created on Jan 27, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

The portfolio is predominantly composed of the Schwab S&P 500 Index Fund, making up nearly 93% of the total allocation. This overwhelming concentration in a single fund indicates a strong focus on large-cap U.S. equities. While this provides exposure to established companies, it limits diversification across different asset classes and regions. A more balanced allocation could reduce risk by including other asset types such as bonds or international equities. This would potentially enhance the portfolio's resilience to market fluctuations.

Growth Info

Historically, the portfolio has performed well, with a compound annual growth rate (CAGR) of 14.63%. This strong performance reflects the robust growth of U.S. large-cap stocks, particularly in recent years. However, the maximum drawdown of -33.66% highlights the volatility and risk associated with such concentrated exposure. Comparing to a benchmark, this performance is commendable, but it is important to remember that past performance does not guarantee future results. Diversification may help mitigate future risks while maintaining competitive returns.

Projection Info

The Monte Carlo simulation, which uses historical data to forecast future outcomes, shows a wide range of potential returns. The 5th percentile projects a 67% increase, while the 67th percentile suggests a 610.8% increase. This highlights the uncertainty and variability in future performance. While the simulation indicates a high probability of positive returns (989 out of 1,000), it's important to note that these projections are based on historical trends and not guaranteed. Diversifying the portfolio could provide more stable returns across different market conditions.

Asset classes Info

  • Stocks
    100%

The portfolio is solely invested in stocks, lacking exposure to other asset classes such as bonds or cash. This single asset class approach can lead to higher volatility and risk, as it does not benefit from the stabilizing effects of bonds or other non-equity assets. Diversifying into multiple asset classes can reduce risk and provide more consistent returns over time. Comparing to a balanced benchmark, adding fixed income or alternative investments could improve the risk-return profile of the portfolio.

Sectors Info

  • Technology
    34%
  • Financials
    13%
  • Health Care
    10%
  • Consumer Discretionary
    10%
  • Telecommunications
    9%
  • Industrials
    7%
  • Consumer Staples
    5%
  • Energy
    3%
  • Utilities
    3%
  • Real Estate
    2%
  • Basic Materials
    2%
  • Consumer Discretionary
    1%

The portfolio is heavily weighted towards technology, which constitutes 34% of the allocation. This sector concentration can lead to higher volatility, especially during periods of economic uncertainty or interest rate changes. While tech has been a strong performer, it is crucial to balance this with exposure to other sectors like healthcare or consumer staples to mitigate sector-specific risks. Aligning sector weights more closely with a diversified benchmark could enhance stability and reduce potential drawdowns.

Regions Info

  • North America
    99%
  • Europe Developed
    1%

Geographically, the portfolio is almost entirely focused on North America, with 99% of assets in this region. This lack of international exposure limits potential benefits from global diversification. Investing in international markets can provide access to different economic cycles and growth opportunities. Considering a more balanced geographic allocation, similar to global benchmarks, could reduce regional risks and potentially enhance returns through exposure to emerging markets or developed economies outside North America.

Market capitalization Info

  • Mega-cap
    48%
  • Large-cap
    33%
  • Mid-cap
    17%
  • Small-cap
    1%

The portfolio's market capitalization is concentrated in mega and big-cap stocks, comprising 81% of the allocation. While large-cap stocks offer stability and established market presence, they may limit growth potential compared to smaller-cap stocks. Including a broader range of market capitalizations, such as small or mid-cap stocks, could provide diversification benefits and increase growth opportunities. Balancing market cap exposure in line with diversified benchmarks can enhance the overall risk-return profile.

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 current portfolio composition can be optimized using the Efficient Frontier, which identifies the best possible risk-return ratio based on existing assets. By adjusting the allocation among the current holdings, the portfolio could achieve a more favorable balance between risk and return. This optimization does not necessarily mean adding new assets, but rather reallocating within the existing ones to maximize efficiency. It's important to note that "efficiency" focuses on risk-return trade-offs, not diversification or other goals.

Dividends Info

  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • SCHWAB INTERNATIONAL INDEX FUND SELECT SHARES 3.10%
  • Schwab S&P 500 Index Fund 1.20%
  • Weighted yield (per year) 1.15%

The portfolio's overall dividend yield is 1.15%, with the Schwab International Index Fund contributing the highest yield at 3.10%. While dividends provide a steady income stream, the current yield is relatively low, reflecting the growth-oriented nature of the investments. For investors seeking income, incorporating higher-yielding assets could enhance the portfolio's income potential. Balancing growth and income through diversified dividend-paying stocks or funds can support a more comprehensive investment strategy.

Ongoing product costs Info

  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • SCHWAB INTERNATIONAL INDEX FUND SELECT SHARES 0.06%
  • Schwab S&P 500 Index Fund 0.02%
  • Weighted costs total (per year) 0.02%

The portfolio benefits from impressively low costs, with a total expense ratio (TER) of 0.02%. Low costs are advantageous as they allow more of the portfolio's returns to be retained by the investor. This cost efficiency aligns well with long-term investment goals, as it can significantly enhance cumulative returns over time. Maintaining this low-cost structure while diversifying into additional asset classes or regions can further optimize the portfolio's performance without increasing expenses significantly.

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