A growth-focused portfolio with high U.S. exposure and low diversification across sectors

Report created on Dec 22, 2024

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

The portfolio primarily consists of ETFs, with a significant allocation towards large-cap and mid-cap U.S. equities. Notably, the Vanguard S&P 500 ETF holds the largest share at 35%, emphasizing a focus on established companies. While this composition aligns with growth objectives, it lacks diversification, as it heavily leans towards U.S. equities. To enhance diversification, consider incorporating international or alternative asset classes, which can mitigate risks associated with market-specific downturns.

Growth Info

Historically, the portfolio has performed well, achieving a Compound Annual Growth Rate (CAGR) of 18.22%. This strong performance can be attributed to the significant exposure to large-cap U.S. equities, which have generally performed well over the past decade. However, the maximum drawdown of -36.23% indicates vulnerability during market downturns. Diversifying asset classes and regions could help stabilize returns and reduce potential losses in adverse market conditions.

Projection Info

Forward projections using Monte Carlo simulations indicate an optimistic outlook, with a median expected return of 774.26%. Monte Carlo simulations use historical data to model potential future outcomes, but it's crucial to remember that past performance doesn't guarantee future results. The portfolio's high risk score suggests potential for significant returns, but also increased volatility. Regularly reviewing and adjusting the portfolio can help align it with changing market conditions and investment goals.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily weighted towards stocks, with over 99% in equities, and a negligible cash position. This concentration aligns with a growth strategy but may increase risk due to lack of diversification. By integrating other asset classes such as bonds or real estate, the portfolio could achieve better risk-adjusted returns. Diversifying asset classes can provide stability and reduce the impact of market volatility on overall portfolio performance.

Sectors Info

  • Technology
    26%
  • Financials
    15%
  • Industrials
    13%
  • Consumer Discretionary
    13%
  • Health Care
    9%
  • Telecommunications
    7%
  • Energy
    6%
  • Consumer Staples
    6%
  • Basic Materials
    4%
  • Utilities
    1%
  • Real Estate
    1%

The sector allocation shows a strong bias towards technology at nearly 26%, followed by financial services and industrials. While this sector focus can drive growth during favorable market conditions, it also exposes the portfolio to sector-specific risks. Balancing sector weights by adding exposure to underrepresented areas, such as utilities or real estate, can enhance diversification and reduce vulnerability to sector downturns.

Regions Info

  • North America
    99%
  • Europe Developed
    1%

The portfolio is predominantly concentrated in North America, with over 99% exposure. This geographic concentration limits diversification and exposes the portfolio to regional risks, such as economic downturns or policy changes in the U.S. Introducing more global exposure, particularly in emerging markets, could provide growth opportunities and cushion against adverse events in the U.S. market, enhancing overall portfolio resilience.

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 balances risk and return. This approach identifies the best possible risk-return ratio based on current assets. Adjusting allocations between existing assets could enhance efficiency, potentially improving returns without increasing risk. However, remember that optimization focuses on the current asset mix and may not address diversification or other broader investment goals.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.60%
  • Schwab U.S. Dividend Equity ETF 3.70%
  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • Vanguard S&P 500 ETF 0.90%
  • Invesco S&P MidCap Quality ETF 4.90%
  • Weighted yield (per year) 1.82%

The portfolio's dividend yield stands at 1.82%, with the Schwab U.S. Dividend Equity ETF contributing the highest yield at 3.7%. While dividends provide a steady income stream, the overall yield is modest, reflecting the growth-oriented nature of the portfolio. If income generation is a goal, consider increasing allocations to higher-yielding assets or funds, balancing the need for growth with income stability.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • Vanguard S&P 500 ETF 0.03%
  • Invesco S&P MidCap Quality ETF 0.25%
  • Weighted costs total (per year) 0.11%

The total expense ratio (TER) of 0.11% is impressively low, supporting better long-term performance by minimizing costs. This cost efficiency is a strength of the portfolio, as lower fees can significantly enhance net returns over time. Maintaining this focus on cost-effective investments will continue to benefit the portfolio. Regularly reviewing and comparing fund fees can ensure that the portfolio remains cost-efficient.

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