A growth-focused portfolio with high US equity concentration and moderate international diversity

Report created on Dec 7, 2024

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

4/5
Broadly Diversified
Less diversification More diversification

Positions

The portfolio is heavily weighted towards equities, with a significant 55% allocation to the iShares Core S&P 500 ETF. This indicates a strong focus on large-cap US stocks, which are typically more stable and offer growth potential. The remaining allocations include international and small-to-mid cap US equities, providing some diversification. This composition is relevant as it balances growth with a degree of risk through diversification, but it might lack exposure to other asset classes like bonds or commodities. To enhance diversification, consider incorporating alternative asset classes that can provide stability during market downturns.

Growth Info

Historically, the portfolio has shown impressive performance, with a compound annual growth rate (CAGR) of 16.36%. However, it also experienced a significant maximum drawdown of -35.75%, indicating vulnerability during market downturns. This performance trend highlights the potential for high returns but also the associated risks. It's essential to understand that past performance does not guarantee future results. To mitigate risks, consider strategies such as rebalancing or incorporating more defensive assets to reduce volatility and protect against large drawdowns.

Projection Info

The Monte Carlo simulation, which uses historical data to predict future outcomes, suggests a wide range of potential returns. With 1,000 simulations, the median projection shows a 579.79% increase, while the 5th percentile indicates a 56.45% rise. These projections emphasize the uncertainty and variability of future returns. While the simulation provides valuable insights, it's important to remember that it's based on past data and does not account for unprecedented market events. To prepare for various outcomes, regularly review and adjust your investment strategy to align with changing market conditions and personal goals.

Asset classes Info

  • Stocks
    100%

The portfolio is overwhelmingly concentrated in stocks, accounting for nearly 100% of the allocation. This heavy reliance on equities suggests a high-risk, high-reward strategy, suitable for investors seeking growth. However, the lack of diversification across asset classes could increase vulnerability to market volatility. Diversifying into other asset classes, such as bonds or real estate, could provide stability and reduce overall risk. By balancing the portfolio with non-correlated assets, you can achieve a more resilient investment strategy that withstands different economic cycles.

Sectors Info

  • Technology
    24%
  • Financials
    17%
  • Consumer Discretionary
    12%
  • Industrials
    11%
  • Health Care
    9%
  • Telecommunications
    7%
  • Consumer Staples
    6%
  • Energy
    5%
  • Basic Materials
    3%
  • Utilities
    2%
  • Real Estate
    2%

The portfolio is diversified across various sectors, with technology, financial services, and consumer cyclicals being the largest allocations. This sectoral balance offers exposure to different areas of the economy, potentially reducing sector-specific risks. However, the prominence of technology stocks could increase vulnerability to tech sector volatility. To manage this risk, consider adjusting sector allocations to achieve a more balanced exposure. This approach can help mitigate potential downturns in any single sector and enhance overall portfolio stability.

Regions Info

  • North America
    86%
  • Europe Developed
    6%
  • Asia Emerging
    2%
  • Japan
    2%
  • Asia Developed
    2%
  • Australasia
    1%
  • Africa/Middle East
    1%

With 85.59% of the portfolio allocated to North America, there's a heavy geographic concentration in the US market. While this provides stability and familiarity, it limits exposure to international growth opportunities. The remaining international allocation is relatively small, with modest exposure to Europe, Asia, and other regions. Expanding geographic diversification can help tap into global growth and reduce reliance on the US economy. Consider increasing allocations to emerging markets or other developed regions to enhance diversification and capture potential growth abroad.

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 be optimized using the Efficient Frontier, which seeks the best risk-return ratio by adjusting asset allocations. Currently, the portfolio's focus on equities may not be fully efficient in balancing risk and return. By reallocating between existing assets, you can achieve a more optimal balance that maximizes returns for a given level of risk. Regularly reassess the portfolio's allocations and consider minor adjustments to improve efficiency, aligning with your risk tolerance and financial objectives.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.50%
  • Franklin LibertyQ U.S. Mid Cap Equity ETF 1.20%
  • Schwab Fundamental U.S. Large Company Index ETF 1.20%
  • iShares Core S&P 500 ETF 1.20%
  • iShares Core MSCI Total International Stock ETF 3.00%
  • Weighted yield (per year) 1.50%

The portfolio offers a modest dividend yield of 1.5%, primarily driven by the iShares Core MSCI Total International Stock ETF. Dividends can provide a steady income stream and contribute to total returns, especially during periods of market volatility. While growth is the primary focus, enhancing the dividend yield could improve income stability. Consider reallocating a portion of the portfolio to higher-yielding assets to balance growth with income generation, ensuring a more comprehensive approach to achieving long-term financial goals.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Franklin LibertyQ U.S. Mid Cap Equity ETF 0.30%
  • Schwab Fundamental U.S. Large Company Index ETF 0.25%
  • iShares Core S&P 500 ETF 0.03%
  • iShares Core MSCI Total International Stock ETF 0.07%
  • Weighted costs total (per year) 0.11%

The portfolio's total expense ratio (TER) is relatively low at 0.11%, indicating cost-efficient management. Lower costs can significantly improve long-term returns by minimizing the drag on performance. However, it's crucial to remain vigilant about fees, as they can compound over time and erode gains. Regularly review and compare expense ratios of current holdings with similar options to ensure you're getting the best value. By keeping costs in check, you can maximize the portfolio's growth potential and enhance overall returns.

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