A growth-focused portfolio with a high concentration in U.S. mega-cap stocks

Report created on Apr 12, 2025

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

This portfolio consists of two ETFs, each with a 50% allocation: the Vanguard S&P 500 Growth Index Fund ETF and the Vanguard Total Stock Market Index Fund ETF. This structure indicates a strong focus on U.S. equities, specifically large-cap growth stocks. Compared to a benchmark, this portfolio lacks diversification across asset classes, limiting its exposure to potential growth opportunities in other areas like bonds or international equities. A more diversified portfolio might include additional asset classes to reduce risk and enhance potential returns.

Growth Info

Historically, this portfolio has shown impressive performance with a CAGR of 13.47%. This means that the portfolio has grown at an average rate of 13.47% per year. However, it also experienced a maximum drawdown of -33.12%, indicating significant volatility during market downturns. When compared to a benchmark, the returns are strong, but the drawdown highlights the potential risk. Investors seeking to minimize volatility might consider diversifying into less correlated assets to cushion against market dips.

Projection Info

The forward projection, using Monte Carlo simulations, suggests a wide range of potential outcomes. Monte Carlo simulation uses historical data to estimate future performance by running multiple scenarios. The median outcome shows a potential growth of 441%, while the 5th percentile predicts a 63.8% increase. However, it's essential to note that past performance does not guarantee future results. To improve future outcomes, consider adding less correlated assets to reduce risk and enhance potential returns.

Asset classes Info

  • Stocks
    100%

The portfolio is entirely invested in stocks, with no allocation to other asset classes like bonds or real estate. This lack of diversification can lead to increased volatility and risk, especially during market downturns. Compared to a diversified benchmark, this portfolio is more susceptible to market fluctuations. By incorporating other asset classes, such as bonds, investors can potentially reduce risk and achieve more stable returns over time.

Sectors Info

  • Technology
    35%
  • Financials
    13%
  • Telecommunications
    12%
  • Consumer Discretionary
    11%
  • Health Care
    9%
  • Industrials
    8%
  • Consumer Staples
    5%
  • Energy
    2%
  • Real Estate
    2%
  • Utilities
    2%
  • Basic Materials
    1%

The sector allocation is heavily weighted towards technology, making up 35% of the portfolio. Other sectors like financial services and communication services also have significant allocations. This concentration in technology could lead to higher volatility, especially if interest rates rise. Compared to a benchmark, the sector concentration is notable. Balancing the sector allocation by including more diverse sectors could help mitigate risks associated with overexposure to a single sector.

Regions Info

  • North America
    100%

Geographically, the portfolio is 100% allocated to North America, with no exposure to other regions. This lack of geographic diversification can increase risk if the U.S. market underperforms. Compared to global benchmarks, this portfolio is significantly underexposed to international markets. By adding international equities, investors can potentially reduce risk and benefit from growth opportunities in other regions, enhancing overall portfolio performance.

Market capitalization Info

  • Mega-cap
    53%
  • Large-cap
    28%
  • Mid-cap
    15%
  • Small-cap
    3%
  • Micro-cap
    1%

The portfolio is heavily weighted towards mega-cap stocks, which make up 53% of the allocation. Large-cap stocks generally offer stability, but this concentration can limit exposure to potentially higher growth opportunities found in small or mid-cap stocks. Compared to a more balanced benchmark, this portfolio may miss out on the growth potential of smaller companies. Diversifying across market capitalizations could enhance returns and reduce risk.

Redundant positions Info

  • Vanguard S&P 500 Growth Index Fund ETF Shares
    Vanguard Total Stock Market Index Fund ETF Shares
    High correlation

The assets in this portfolio are highly correlated, meaning they tend to move together in the market. This high correlation limits the diversification benefits, as both ETFs are likely to perform similarly. During market downturns, this can lead to increased risk and potential losses. To improve diversification, consider adding assets with lower correlation to the existing holdings, which can help mitigate risk and smooth out returns.

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.

Optimizing the portfolio using the Efficient Frontier could potentially enhance risk-return balance. The Efficient Frontier represents the set of optimal portfolios that offer the highest expected return for a defined level of risk. However, before optimization, it's crucial to address the high correlation between the current assets. Diversifying by adding less correlated assets can improve the portfolio's position on the Efficient Frontier, maximizing returns for the given risk level.

Dividends Info

  • Vanguard S&P 500 Growth Index Fund ETF Shares 0.60%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.50%
  • Weighted yield (per year) 1.05%

The portfolio has a total dividend yield of 1.05%, with the Vanguard Total Stock Market Index Fund ETF contributing the most. Dividends can provide a steady income stream, which can be particularly beneficial during periods of market volatility. However, compared to income-focused portfolios, the yield is relatively low. Investors seeking higher income might consider adding dividend-focused assets to the portfolio to enhance income potential.

Ongoing product costs Info

  • Vanguard S&P 500 Growth Index Fund ETF Shares 0.10%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Weighted costs total (per year) 0.06%

The portfolio's total expense ratio (TER) is 0.06%, which is impressively low. Low costs are beneficial as they leave more room for returns to compound over time. Compared to industry averages, these costs are highly competitive, supporting better long-term performance. Investors should continue to monitor and maintain low costs to ensure that expenses do not erode returns over time, which is crucial for achieving financial goals.

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