Growth-Focused Portfolio with Broad Diversification and Notable U.S. Stock Concentration

Report created on Jul 8, 2024

Risk profile

  • Secure
    Speculative

The risk profile, derived from past market volatility, reflects the level of risk the portfolio is exposed to. This assessment helps align your investments with your financial goals and comfort with market fluctuations.

Diversification profile

  • Focused
    Diversified

The diversification assessment evaluates the spread of investments across asset classes, regions, and sectors. This ensures a balanced mix, reducing risk and maximizing returns by not concentrating in any single area.

Positions

The portfolio is composed of a mix of ETFs and individual stocks, with a significant focus on U.S. equities. Key holdings include the Vanguard S&P 500 ETF, which constitutes 25% of the portfolio, and a variety of ETFs covering Japan, Taiwan, and India. This combination suggests a growth-oriented investment strategy, aiming to benefit from both developed and emerging markets. The presence of individual stocks like Amazon and Microsoft indicates a tilt towards technology and innovation. Overall, the portfolio is broadly diversified, but the heavy U.S. allocation could expose it to risks specific to the American market.

Growth Info

Historically, the portfolio has delivered a strong CAGR of 17.61%, reflecting its growth-oriented nature. However, it experienced a maximum drawdown of -30.81%, indicating significant volatility. This performance suggests that while the portfolio can generate impressive returns, it is also susceptible to market downturns. The concentration in high-growth sectors like technology likely contributes to both the high returns and the volatility. Investors should be aware that past performance does not guarantee future results, and maintaining a balance between risk and return is crucial for long-term success.

Projection Info

Using a Monte Carlo simulation, which runs numerous scenarios to predict potential outcomes, the portfolio shows promising forward projections. With a hypothetical initial investment, the median return is projected at 1,333.12%, and 980 out of 1,000 simulations resulted in positive returns. This suggests a high probability of future gains, albeit with some risk. The simulation underscores the potential for substantial growth, aligning with the portfolio's risk classification. Investors should remain mindful of market fluctuations and the inherent uncertainties in projections, using them as a guide rather than a guarantee.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily weighted towards stocks, with 99.72% allocated to equities and a minimal cash position. This asset class distribution aligns with a growth-focused investment strategy, aiming to capitalize on stock market appreciation. While this approach can yield high returns, it also increases exposure to market volatility. Investors should consider whether this high equity allocation fits their risk tolerance and financial goals. Diversifying into other asset classes, such as bonds or real estate, could potentially reduce risk and provide more stability.

Sectors Info

  • Technology
    27%
  • Financials
    18%
  • Telecommunications
    14%
  • Consumer Discretionary
    11%
  • Industrials
    8%
  • Consumer Staples
    7%
  • Health Care
    6%
  • Energy
    3%
  • Basic Materials
    3%
  • Utilities
    1%
  • Real Estate
    1%

Sector allocation reveals a strong emphasis on technology, which makes up 26.82% of the portfolio, followed by financial services and communication services. This sector concentration suggests a belief in the continued growth of tech-driven industries. While this focus can drive returns, it also introduces sector-specific risks. A downturn in tech could impact the portfolio significantly. To mitigate this, investors might consider diversifying into underrepresented sectors like utilities or real estate, which could offer more defensive characteristics.

Regions Info

  • North America
    62%
  • Japan
    15%
  • Asia Developed
    12%
  • Asia Emerging
    11%

Geographically, the portfolio is predominantly invested in North America, with 61.85% exposure, followed by Japan and other Asian markets. This geographic distribution provides a mix of developed and emerging market exposure, aiming to capture growth across different economies. However, the heavy North American focus could pose risks if the U.S. market faces economic challenges. Balancing this with more exposure to Europe or Latin America might enhance diversification and reduce geographic concentration risk.

Redundant positions Info

  • Vanguard S&P 500 ETF
    Schwab U.S. Dividend Equity ETF
    High correlation

Within the portfolio, there are highly correlated assets, notably between the Vanguard S&P 500 ETF and the Schwab U.S. Dividend Equity ETF. This correlation indicates that these assets tend to move in the same direction, which could limit diversification benefits. While some correlation is expected, excessive overlap might not contribute to risk reduction. Investors should evaluate whether these holdings align with their diversification strategy and consider replacing highly correlated assets with those that offer lower correlation to enhance 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.

Before optimizing, focus on reducing overlap in highly correlated assets that don't enhance diversification. To achieve a riskier portfolio, increase exposure to high-growth sectors or emerging markets. For a more conservative approach, consider rebalancing towards dividend-paying stocks or adding bonds. The efficient frontier can guide these adjustments, balancing risk and return. However, ensure any changes align with personal risk tolerance and financial goals. Continually reassess portfolio composition and performance to maintain an optimal balance.

Dividends Info

  • American Express Company 0.90%
  • JPMorgan BetaBuilders Japan ETF 2.80%
  • Capital One Financial Corporation 1.30%
  • Costco Wholesale Corp 2.00%
  • Franklin FTSE India ETF 1.60%
  • Franklin FTSE Taiwan ETF 2.50%
  • Alphabet Inc Class C 0.20%
  • Meta Platforms Inc. 0.30%
  • Microsoft Corporation 0.50%
  • Schwab U.S. Dividend Equity ETF 3.40%
  • AT&T Inc 4.80%
  • Vanguard S&P 500 ETF 1.20%
  • Weighted yield (per year) 1.84%

The portfolio's total dividend yield stands at 1.84%, with the Schwab U.S. Dividend Equity ETF and AT&T Inc contributing significantly. This yield provides a modest income stream, complementing the growth focus of the portfolio. While dividends can offer stability during market volatility, the overall yield is relatively low due to the emphasis on growth stocks. Investors seeking higher income might explore increasing allocations to dividend-focused assets, balancing growth potential with income generation.

Ongoing product costs Info

  • JPMorgan BetaBuilders Japan ETF 0.19%
  • Franklin FTSE India ETF 0.19%
  • Franklin FTSE Taiwan ETF 0.19%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.09%

The portfolio's total expense ratio (TER) is 0.09%, which is competitive and cost-effective. This low TER ensures that more of the portfolio's returns are retained by the investor, rather than being eroded by fees. Keeping costs low is a key principle of successful investing, as high fees can significantly impact long-term returns. Investors should continue to monitor expense ratios and consider cost-effective options when making portfolio adjustments, ensuring that fees remain minimized.

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