A growth-focused portfolio with low diversification and high US market concentration

Report created on Jan 6, 2025

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

The portfolio is heavily weighted towards large-cap and total stock market ETFs, each making up 40% of the allocation. It includes a smaller stake in technology and mid-cap momentum ETFs. This composition suggests a strong focus on growth, but it lacks diversification across asset classes. Compared to common benchmarks, the portfolio is concentrated in equities, which can lead to higher volatility. Consider adding different asset classes like bonds or international equities to balance risk and potential returns.

Growth Info

Historically, the portfolio has performed well, with a Compound Annual Growth Rate (CAGR) of 16.61%. This suggests strong growth potential, but it's important to note the maximum drawdown of -33.69%, indicating potential for significant losses during market downturns. While past performance is not a guarantee of future results, it provides a context for understanding the portfolio's risk and return profile. Diversifying the portfolio could help mitigate future drawdowns while maintaining growth potential.

Projection Info

Monte Carlo simulations, which use historical data to predict future outcomes, show a wide range of potential returns. With a 50th percentile return of 773.47% and a 5th percentile of 153.04%, the projections highlight substantial variability. While the simulations show a strong annualized return of 19.03%, remember that these are based on past trends and assumptions. To improve the reliability of these projections, consider reducing asset correlation and increasing diversification.

Asset classes Info

  • Stocks
    100%

The portfolio is overwhelmingly invested in stocks, with a negligible amount in cash. This single asset class focus can lead to higher volatility and risk, particularly during market downturns. Compared to diversified benchmarks, this allocation lacks balance. To enhance stability and potentially improve risk-adjusted returns, consider incorporating other asset classes such as bonds or commodities, which may provide a buffer against equity market fluctuations.

Sectors Info

  • Technology
    42%
  • Consumer Discretionary
    11%
  • Financials
    11%
  • Health Care
    9%
  • Telecommunications
    9%
  • Industrials
    8%
  • Consumer Staples
    4%
  • Energy
    2%
  • Basic Materials
    2%
  • Real Estate
    2%
  • Utilities
    1%

The portfolio is heavily concentrated in the technology sector, comprising nearly 42% of the total allocation. This concentration can lead to higher volatility, especially during periods of tech sector downturns. While technology has been a strong performer, overexposure may increase risk. Consider diversifying into sectors like healthcare, consumer staples, or utilities, which can provide stability and reduce reliance on a single sector's performance.

Regions Info

  • North America
    100%

With over 99% of the portfolio allocated to North America, the geographic exposure is highly concentrated. This limits diversification benefits and increases vulnerability to regional economic downturns. Common benchmarks typically have a more balanced geographic allocation. To reduce geographic risk, consider adding international equities from developed and emerging markets, which can offer growth opportunities and enhance diversification.

Redundant positions Info

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

The portfolio's assets are highly correlated, particularly among the large-cap growth, technology, and total stock market ETFs. High correlation means these assets tend to move together, which can limit diversification benefits and increase portfolio risk during market downturns. To reduce correlation, consider including assets with low or negative correlation, such as bonds or international equities, which can help smooth returns and mitigate risk.

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.

While the portfolio is focused on growth, it could benefit from optimization using the Efficient Frontier concept. This involves adjusting the asset mix to achieve the best possible risk-return ratio. The current high correlation among assets suggests room for improvement. By diversifying into less correlated assets, you can potentially enhance returns without increasing risk. This approach aims to maximize efficiency based on the existing assets.

Dividends Info

  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • Vanguard Information Technology Index Fund ETF Shares 0.60%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Invesco S&P MidCap Momentum ETF 0.20%
  • Weighted yield (per year) 0.76%

The portfolio's dividend yield is modest at 0.76%, reflecting its growth-oriented focus. Dividends can provide a steady income stream, especially in volatile markets. While growth stocks typically offer lower dividends, consider balancing the portfolio with some higher-yielding assets to enhance income potential. This could help offset periods of low capital appreciation and provide a more stable total return.

Ongoing product costs Info

  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • Vanguard Information Technology Index Fund ETF Shares 0.10%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Invesco S&P MidCap Momentum ETF 0.34%
  • Weighted costs total (per year) 0.07%

The portfolio's total expense ratio (TER) is low at 0.07%, which is a positive aspect for long-term performance. Low costs mean more of your returns stay in your pocket, compounding over time. This cost efficiency aligns well with best practices and supports better net returns compared to higher-cost portfolios. Continue to monitor and compare expense ratios to ensure the portfolio remains cost-effective.

What next?

Ready to invest in this portfolio?

Select a broker that fits your needs and watch for low fees to maximize your returns.

Select broker

Create your own report?

Analyze your portfolio

Join our community!

Join Discord

The information provided on this platform is for informational purposes only and should not be considered as financial or investment advice. Insightfolio does not provide investment advice, personalized recommendations, or guidance regarding the purchase, holding, or sale of financial assets. The tools and content are intended for educational purposes only and are not tailored to individual circumstances, financial needs, or objectives.

Insightfolio assumes no liability for the accuracy, completeness, or reliability of the information presented. Users are solely responsible for verifying the information and making independent decisions based on their own research and careful consideration. Use of the platform should not replace consultation with qualified financial professionals.

Investments involve risks. Users should be aware that the value of investments may fluctuate and that past performance is not an indicator of future results. Investment decisions should be based on personal financial goals, risk tolerance, and independent evaluation of relevant information.

Insightfolio does not endorse or guarantee the suitability of any particular financial product, security, or strategy. Any projections, forecasts, or hypothetical scenarios presented on the platform are for illustrative purposes only and are not guarantees of future outcomes.

By accessing the services, information, or content offered by Insightfolio, users acknowledge and agree to these terms of the disclaimer. If you do not agree to these terms, please do not use our platform.

Instrument logos provided by Elbstream.

Help us improve Insightfolio

Your feedback makes a difference! Share your thoughts in our quick survey. Take the survey