A highly concentrated portfolio with strong US focus and moderate diversification

Report created on Jan 2, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

This portfolio is heavily concentrated in ETFs, with a significant 85% allocation to the Vanguard Total Stock Market Index Fund ETF. The remaining 15% is split among three other ETFs, including a small international component. While this setup aligns with a common benchmark, it leans heavily towards US equities, which may limit exposure to other growth opportunities. To enhance diversification, consider gradually increasing allocations to non-US assets, ensuring a more balanced global exposure.

Growth Info

Historically, the portfolio has delivered a robust Compound Annual Growth Rate (CAGR) of 13.51%, outperforming many standard benchmarks. However, it also experienced a significant maximum drawdown of -34.71%, indicating potential volatility. While past performance is not indicative of future results, the high returns suggest a strong growth potential, albeit with some risk. To mitigate future drawdowns, consider incorporating more defensive or less correlated assets.

Projection Info

Using Monte Carlo simulations, which project future outcomes based on historical data, the portfolio shows a promising median growth potential of 405.9%. However, these simulations highlight potential variability, with the 5th percentile at 66.78% and the 67th at 589.54%. It's important to remember that such projections are not guarantees and should be used as one of many tools in decision-making. Diversifying further could help stabilize these projections.

Asset classes Info

  • Stocks
    100%

The portfolio is almost entirely invested in stocks, with negligible allocations to cash and other asset classes. This heavy stock focus can drive growth but also adds risk, particularly during market downturns. Diversifying into other asset classes such as bonds or real estate might provide a buffer against volatility. A more balanced asset class distribution is often characteristic of well-diversified portfolios.

Sectors Info

  • Technology
    31%
  • Financials
    13%
  • Health Care
    11%
  • Consumer Discretionary
    11%
  • Industrials
    9%
  • Telecommunications
    9%
  • Consumer Staples
    5%
  • Energy
    3%
  • Real Estate
    3%
  • Utilities
    3%
  • Basic Materials
    2%

There's a notable concentration in the technology sector at over 30%, which can lead to higher volatility, especially in periods of tech market corrections. The remaining sectors are relatively balanced, but the heavy tech weighting could overshadow them. Consider rebalancing to reduce tech exposure and increase allocations to underrepresented sectors, aligning more closely with a diversified benchmark.

Regions Info

  • North America
    95%
  • Europe Developed
    2%
  • Asia Emerging
    1%
  • Japan
    1%
  • Asia Developed
    1%

With nearly 95% of assets in North America, the portfolio is heavily skewed towards the US market. This geographic concentration limits exposure to international markets, which can offer diverse growth opportunities and risk mitigation. Increasing allocations to regions like Europe, Asia, and emerging markets could enhance diversification and potentially improve returns by capturing global economic growth.

Redundant positions Info

  • Schwab U.S. Large-Cap Growth ETF
    Vanguard S&P 500 ETF
    Vanguard Total Stock Market Index Fund ETF Shares
    High correlation

The portfolio's assets are highly correlated, particularly among the US-focused ETFs. This correlation can limit diversification benefits, as similar assets tend to move together during market fluctuations. Reducing this overlap by introducing less correlated assets or different asset classes can help manage risk and improve overall portfolio stability.

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.

Although the portfolio is well-aligned with certain benchmarks, optimization using the Efficient Frontier could further enhance its risk-return ratio. This involves adjusting current allocations to achieve the best possible balance between risk and return. However, this optimization should focus on existing assets and their allocations, not necessarily diversification or other goals.

Dividends Info

  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Vanguard Total International Stock Index Fund ETF Shares 3.40%
  • Weighted yield (per year) 1.36%

The portfolio's overall dividend yield stands at 1.36%, with the Vanguard Total International Stock Index Fund ETF contributing the highest yield of 3.4%. While dividends can provide a steady income stream, the current yield is relatively modest. Investors seeking higher income may consider increasing exposure to higher-yielding assets, balancing this with growth objectives.

Ongoing product costs Info

  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • Vanguard S&P 500 ETF 0.03%
  • 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) 0.03%

The portfolio boasts impressively low costs, with an overall Total Expense Ratio (TER) of just 0.03%. This cost efficiency supports better long-term performance by minimizing expenses that can erode returns. Maintaining low costs is a positive aspect, and regularly reviewing funds to ensure they remain competitive is advisable.

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