A growth-oriented portfolio with a significant concentration in consumer cyclicals and limited international exposure

Report created on Nov 22, 2024

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

The portfolio is heavily weighted towards common stock, making up over 76% of the total investments. Amazon.com Inc holds a substantial 49.08% share, indicating a significant concentration in a single stock. The remaining assets are spread across various ETFs, with a notable allocation to the WisdomTree Floating Rate Treasury Fund at 23.61%. Compared to common benchmarks, this portfolio is less diversified, which could increase risk. To optimize, consider balancing the weightings by reducing single-stock exposure and increasing allocations to other asset classes or ETFs to enhance diversification.

Growth Info

Historically, the portfolio has delivered a strong Compound Annual Growth Rate (CAGR) of 25.59%, outperforming typical market benchmarks. However, it also experienced a maximum drawdown of -50.23%, indicating significant volatility. This suggests that while the portfolio can achieve high returns, it is also susceptible to large losses. Past performance is not a guarantee of future results, but understanding these trends can help manage expectations. To mitigate potential downturns, consider diversifying further to balance risk and reward.

Projection Info

Using a Monte Carlo simulation, which analyzes potential future returns based on historical data, the portfolio projects varied outcomes. The 50th percentile suggests a potential growth of 850.69%, while the worst-case scenario at the 5th percentile still indicates a positive return of 111.95%. The simulation's annualized return is 20.13%, but remember, these are estimates based on past performance and not predictions. To prepare for different market conditions, consider stress-testing the portfolio under various scenarios to understand potential risks and returns better.

Asset classes Info

  • Stocks
    76%
  • Bonds
    24%

The asset allocation is primarily in stocks (76.22%) and bonds (23.61%), with minimal exposure to other classes. This skew towards equities aligns with a growth-focused strategy but may limit diversification benefits. Compared to more balanced portfolios, this one is more volatile due to its heavy reliance on stocks. To enhance diversification, consider introducing other asset classes like real estate or commodities, which can provide additional stability and reduce reliance on a single asset class.

Sectors Info

  • Consumer Discretionary
    52%
  • Technology
    8%
  • Financials
    4%
  • Health Care
    3%
  • Industrials
    3%
  • Telecommunications
    2%
  • Consumer Staples
    2%
  • Energy
    1%
  • Basic Materials
    1%
  • Real Estate
    1%
  • Utilities
    1%

The portfolio is heavily concentrated in consumer cyclicals, comprising 51.97% of the total allocation. This sector-heavy approach may lead to increased volatility, especially during economic downturns when consumer spending declines. While technology and financial services are also represented, their lower weightings might not provide sufficient diversification. To mitigate sector-specific risks, consider redistributing assets across a broader range of sectors, potentially increasing exposure to defensive sectors like healthcare or utilities.

Regions Info

  • North America
    71%
  • Europe Developed
    2%
  • Asia Emerging
    1%
  • Japan
    1%
  • Asia Developed
    1%

Geographically, the portfolio is predominantly focused on North America, representing 70.81% of the total allocation. This heavy regional concentration may limit exposure to growth opportunities in other parts of the world. Emerging markets, for example, only make up a small fraction of the portfolio. To improve geographic diversification, consider increasing allocations to international markets, which can provide exposure to different economic cycles and potentially enhance returns while reducing regional risk.

Redundant positions Info

  • Vanguard Total Stock Market Index Fund ETF Shares
    Schwab U.S. Large-Cap Growth ETF
    High correlation

The portfolio's assets show high correlation, particularly between the Vanguard Total Stock Market Index Fund and Schwab U.S. Large-Cap Growth ETF. This correlation suggests that these assets tend to move together, which can diminish diversification benefits. During market downturns, highly correlated assets may not provide the desired risk mitigation. To enhance diversification, consider replacing or reducing exposure to highly correlated assets with those that have lower correlation, potentially improving the portfolio's resilience to market fluctuations.

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 benefit from optimization using the Efficient Frontier, which aims to achieve the best possible risk-return ratio with the current assets. This process involves adjusting asset weights to find the most efficient allocation. However, before optimizing, focus on reducing overlapping assets that offer no diversification benefits. The goal is to improve the risk-return balance by strategically reallocating within the existing asset pool, ensuring the portfolio is well-positioned to achieve its growth objectives.

Dividends Info

  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • WisdomTree Floating Rate Treasury Fund 4.40%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Vanguard Total International Stock Index Fund ETF Shares 3.40%
  • Weighted yield (per year) 1.51%

The portfolio's total dividend yield is 1.51%, with notable contributions from the WisdomTree Floating Rate Treasury Fund at 4.4% and Vanguard Total International Stock Index Fund at 3.4%. Dividends can provide a steady income stream and help cushion against market volatility. Given the growth focus, the yield is modest but aligns with the portfolio's objectives. To potentially increase income, consider adding high-dividend ETFs or stocks, balancing growth with income generation, and ensuring it aligns with your investment goals.

Ongoing product costs Info

  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • WisdomTree Floating Rate Treasury Fund 0.15%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.05%

The portfolio's total expense ratio (TER) is impressively low at 0.05%, supporting better long-term performance by minimizing costs. The Schwab U.S. Large-Cap Growth ETF and Vanguard ETFs contribute to this efficiency with minimal fees. Keeping costs low is crucial for maximizing net returns, as high fees can erode gains over time. This cost structure is well-aligned with best practices, but it's essential to periodically review and ensure no high-fee assets slip into the portfolio, maintaining this cost advantage.

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