A focused U.S. equity portfolio with a strong growth tilt and low diversification

Report created on Feb 13, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

This portfolio is heavily invested in U.S. equities, with 100% allocation to stocks and significant concentration in large-cap growth ETFs. The Vanguard S&P 500 ETF dominates the portfolio, comprising 55% of the total allocation. This concentration in a single ETF may limit diversification benefits, which is evident in the portfolio's low diversification score. While such a composition can capture substantial market gains, it may also expose the portfolio to risks associated with market downturns. To enhance diversification, consider adding different asset classes such as bonds or international equities, which can provide a buffer against volatility.

Growth Info

The portfolio has demonstrated robust historical performance with a Compound Annual Growth Rate (CAGR) of 14.48%. This indicates strong returns over time, especially when compared to the broader market. However, it's important to note the maximum drawdown of -33.50%, which highlights potential volatility during market downturns. Such periods of high volatility can be unsettling for investors with lower risk tolerance. Balancing the portfolio with more defensive assets could help mitigate these drawdowns, potentially stabilizing returns during turbulent times.

Projection Info

Forward projections using Monte Carlo simulations suggest a wide range of potential outcomes, with an annualized return of 15.01%. While simulations provide a useful framework for understanding potential future performance, they rely on historical data and assumptions that may not hold true. The 5th percentile outcome of 82.9% highlights the risk of underperformance, while the 67th percentile outcome of 705.2% illustrates the potential for strong growth. Investors should be cautious and consider these projections as one of many tools in their decision-making process.

Asset classes Info

  • Stocks
    100%

The portfolio is entirely composed of stocks, which can lead to high returns but also increases exposure to market volatility. This singular focus on equities means missing out on the stabilizing effect of other asset classes like bonds or real estate. Diversifying into other asset classes could reduce risk and provide more consistent returns over time. While equities are known for growth potential, a more balanced allocation could better align with a balanced risk profile, reducing potential volatility.

Sectors Info

  • Technology
    33%
  • Financials
    13%
  • Health Care
    11%
  • Consumer Discretionary
    11%
  • Telecommunications
    9%
  • Industrials
    7%
  • Consumer Staples
    6%
  • Energy
    4%
  • Utilities
    2%
  • Basic Materials
    2%
  • Real Estate
    1%

The portfolio is heavily concentrated in the technology sector, comprising 33% of the total allocation. This overweight position in tech can lead to higher volatility, especially during periods of regulatory scrutiny or interest rate changes. While tech stocks have driven growth in recent years, diversification across sectors could reduce risk. Consider rebalancing to achieve a more even distribution across sectors like healthcare or consumer goods, which can offer stability and growth potential.

Regions Info

  • North America
    99%

With 99% exposure to North American markets, this portfolio lacks geographic diversification. This concentration can lead to increased vulnerability to regional economic downturns or policy changes. By incorporating international equities, particularly from emerging markets, the portfolio could benefit from growth opportunities outside the U.S. This diversification can also reduce risk by spreading investments across different economic environments, potentially leading to more stable returns.

Market capitalization Info

  • Mega-cap
    45%
  • Large-cap
    36%
  • Mid-cap
    17%
  • Small-cap
    1%

The portfolio is primarily invested in mega and large-cap stocks, representing 81% of the total allocation. This focus provides stability and growth potential but limits exposure to smaller companies that may offer higher growth prospects. While large-cap stocks are typically more stable, incorporating mid and small-cap stocks could enhance growth potential and diversification. This balance can provide a mix of stability and opportunity, aligning with a balanced risk profile.

Redundant positions Info

  • Schwab U.S. Large-Cap Growth ETF
    Vanguard S&P 500 ETF
    Schwab U.S. Dividend Equity ETF
    iShares Core Dividend Growth ETF
    High correlation

The portfolio's assets are highly correlated, meaning they tend to move together in the market. This correlation can limit diversification benefits, as losses in one area may not be offset by gains in another. By reducing overlap and adding less correlated assets, the portfolio could achieve better risk management. Consider incorporating assets that have historically shown lower correlation, such as bonds or international stocks, to enhance diversification and reduce overall 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.

The portfolio could benefit from optimization using the Efficient Frontier, which focuses on maximizing returns for a given level of risk. By adjusting the allocation between current assets, the portfolio can achieve a more optimal risk-return balance. This process doesn't necessarily mean adding new assets but rather fine-tuning existing ones. Consider reducing overlap and reallocating towards assets that offer better diversification to enhance the efficiency of the portfolio.

Dividends Info

  • iShares Core Dividend Growth ETF 2.20%
  • Schwab U.S. Dividend Equity ETF 3.60%
  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • Vanguard S&P 500 ETF 1.20%
  • Weighted yield (per year) 1.34%

The portfolio's dividend yield stands at 1.34%, with contributions from ETFs like Schwab U.S. Dividend Equity ETF at 3.60%. Dividends provide a steady income stream and can enhance total returns, especially in volatile markets. However, the overall yield is modest, reflecting the portfolio's growth focus. For investors seeking more income, increasing exposure to higher-yielding assets could be beneficial. Balancing growth and income can provide stability and meet cash flow needs.

Ongoing product costs Info

  • iShares Core Dividend Growth ETF 0.08%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.04%

The portfolio benefits from low costs, with a Total Expense Ratio (TER) of 0.04%. This low TER supports better long-term performance by minimizing the drag on returns. Keeping costs low is crucial for maximizing net returns, especially in a growth-focused portfolio. Investors should continue to monitor costs and seek opportunities to reduce them further, ensuring that the portfolio remains efficient and aligned with financial goals.

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