A growth-focused portfolio with high U.S. exposure and moderate diversification

Report created on Mar 21, 2025

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

4/5
Broadly Diversified
Less diversification More diversification

Positions

The portfolio is heavily weighted towards U.S. equities, with a significant 42% allocation to the Vanguard S&P 500 ETF. This ETF, along with others, provides a solid foundation in large-cap stocks. The portfolio is rounded out with exposure to mid-cap, small-cap, and international markets, though the latter is relatively limited. This composition reflects a growth-oriented strategy, which aligns well with the portfolio's risk classification. The high concentration in U.S. equities suggests a strong belief in the American market's potential, though it may benefit from increased international diversification to mitigate regional risks.

Growth Info

Historically, the portfolio has performed impressively, with a CAGR of 15.18%, indicating strong growth over time. However, it experienced a maximum drawdown of -34.65%, illustrating the inherent risks associated with a growth-focused strategy. The comparison with benchmarks shows that the portfolio has outperformed in terms of growth, but the drawdown highlights the volatility that can accompany such returns. This performance suggests that while potential gains are substantial, investors should be prepared for significant fluctuations and consider their risk tolerance carefully.

Projection Info

The Monte Carlo simulation, which uses historical data to project future outcomes, suggests a wide range of potential returns. The median outcome shows a portfolio value increase of 576.2%, but with a 5th percentile outcome of just 91.8%, indicating the variability in future performance. While the simulation provides a useful perspective on possible outcomes, it's important to remember that past data doesn't guarantee future results. Investors should use these projections as a guide, but maintain a flexible strategy that can adapt to changing market conditions.

Asset classes Info

  • Stocks
    100%

The portfolio is exclusively composed of stocks, which aligns with a high-risk, high-reward growth strategy. While this focus can drive substantial returns, it also lacks the risk mitigation benefits of diversification across different asset classes. Compared to benchmarks, which often include bonds or alternative investments, this portfolio may experience greater volatility. To enhance risk management, consider introducing a small allocation to fixed income or other asset classes, which can provide stability during market downturns.

Sectors Info

  • Technology
    25%
  • Financials
    16%
  • Consumer Discretionary
    12%
  • Industrials
    11%
  • Health Care
    10%
  • Telecommunications
    8%
  • Consumer Staples
    6%
  • Energy
    3%
  • Basic Materials
    3%
  • Real Estate
    3%
  • Utilities
    2%

Sector allocation is notably concentrated in Technology (25%) and Financial Services (16%), with moderate exposure to Consumer Cyclicals and Industrials. This concentration aligns with current market trends but could lead to increased volatility, especially during sector-specific downturns. Compared to sector benchmarks, the portfolio shows a heavier tech weighting, which can be advantageous during periods of tech growth but risky if the sector underperforms. To balance risk, consider diversifying further into sectors like Healthcare or Consumer Defensive.

Regions Info

  • North America
    80%
  • Europe Developed
    9%
  • Japan
    3%
  • Asia Emerging
    3%
  • Asia Developed
    2%
  • Australasia
    1%
  • Africa/Middle East
    1%

The portfolio's geographic allocation is heavily tilted towards North America (80%), with limited exposure to other regions. This concentration in the U.S. market can be beneficial when the U.S. economy is strong but poses a risk if it underperforms relative to global markets. Compared to global benchmarks, the portfolio underweights emerging markets and Europe. Increasing exposure to these regions could enhance diversification and provide growth opportunities in less correlated markets, reducing overall portfolio risk.

Market capitalization Info

  • Mega-cap
    39%
  • Large-cap
    28%
  • Mid-cap
    19%
  • Small-cap
    12%
  • Micro-cap
    1%

The portfolio is predominantly invested in large-cap stocks, with 39% in mega-cap and 28% in big-cap companies. This focus offers stability and steady growth, as larger companies are generally more established. However, the allocation to small and mid-cap stocks (31%) provides a growth potential that complements the stability of large caps. Compared to market cap benchmarks, the portfolio is well-balanced, but investors might consider adjusting allocations to align with specific growth or stability goals.

Redundant positions Info

  • iShares Core S&P Mid-Cap ETF
    Vanguard Small-Cap Index Fund ETF Shares
    High correlation
  • Schwab U.S. Large-Cap Growth ETF
    Vanguard S&P 500 ETF
    Invesco S&P 500® Quality ETF
    iShares MSCI USA Quality Factor ETF
    High correlation

The portfolio contains several highly correlated assets, such as the iShares Core S&P Mid-Cap ETF and the Vanguard Small-Cap Index Fund ETF Shares. Highly correlated assets tend to move together, which can limit diversification benefits during market downturns. While these assets may offer similar growth potential, reducing exposure to redundant holdings could enhance diversification. Consider diversifying into less correlated assets to improve risk management and potentially enhance the portfolio's resilience in volatile markets.

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. However, before pursuing optimization, it's crucial to address the issue of overlapping, highly correlated assets. By reducing redundancy, the portfolio can achieve better diversification, which is a key component of the Efficient Frontier strategy. Once redundancy is minimized, consider adjusting asset weights to enhance the risk-return profile, ensuring the portfolio is aligned with your risk tolerance and investment objectives.

Dividends Info

  • iShares Core S&P Mid-Cap ETF 1.40%
  • iShares MSCI USA Quality Factor ETF 1.10%
  • Schwab U.S. Large-Cap Growth ETF 0.30%
  • Invesco S&P 500® Quality ETF 0.60%
  • Invesco S&P 500® Momentum ETF 0.40%
  • Vanguard Small-Cap Index Fund ETF Shares 1.40%
  • Vanguard FTSE Developed Markets Index Fund ETF Shares 2.50%
  • Vanguard S&P 500 ETF 1.30%
  • Vanguard FTSE Emerging Markets Index Fund ETF Shares 3.00%
  • Weighted yield (per year) 1.44%

With a total dividend yield of 1.44%, the portfolio provides a modest income stream. The Vanguard FTSE Emerging Markets Index Fund ETF Shares offers the highest yield at 3.00%, contributing significantly to the overall income. Dividend yields can offer a buffer during market downturns and enhance total returns. However, for a growth-focused investor, dividends may not be a primary concern. If income generation becomes a priority, consider reallocating to higher-yielding assets or increasing exposure to dividend-focused funds.

Ongoing product costs Info

  • iShares Core S&P Mid-Cap ETF 0.05%
  • iShares MSCI USA Quality Factor ETF 0.15%
  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • Invesco S&P 500® Quality ETF 0.15%
  • Invesco S&P 500® Momentum ETF 0.13%
  • Vanguard Small-Cap Index Fund ETF Shares 0.05%
  • Vanguard FTSE Developed Markets Index Fund ETF Shares 0.05%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard FTSE Emerging Markets Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.06%

The portfolio's total expense ratio (TER) is impressively low at 0.06%, which is beneficial for long-term performance. Low costs help maximize returns by reducing the drag on portfolio gains. Compared to industry averages, this TER is highly competitive, indicating that the portfolio is efficiently managed in terms of expenses. Maintaining low costs should remain a priority, as even small increases in expenses can significantly impact long-term returns. Regularly review the cost structure to ensure it remains aligned with investment goals.

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