A growth-focused portfolio with strong North American exposure and a high correlation of assets

Report created on Dec 24, 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 equity funds, with a significant portion allocated to large-cap U.S. stocks. The BlackRock S&P 500 Stock Fund holds the largest share, reflecting a strong emphasis on established U.S. companies. Compared to a typical growth portfolio, this one shows a higher concentration in large-cap equities, which can lead to robust long-term growth but may lack in diversification. To balance this, consider incorporating more diverse asset types, such as international equities or alternative investments, to potentially enhance returns and reduce risk.

Growth Info

Historically, the portfolio has demonstrated a solid CAGR of 11.72%, indicating strong growth over time. However, it also experienced a significant maximum drawdown of -32.86%, reflecting its vulnerability during market downturns. This performance aligns with its growth-focused nature, where higher volatility is expected. While past performance is not indicative of future results, it provides a useful benchmark for evaluating risk tolerance. To mitigate potential losses, consider strategies like increasing bond exposure or exploring hedging options during volatile periods.

Projection Info

Forward projections using Monte Carlo simulations indicate a wide range of potential outcomes, with a median return of 237.23%. This method uses historical data to model future performance, acknowledging that past trends may not predict future results. The simulations suggest a high probability of positive returns, but also highlight the inherent uncertainty in growth-focused portfolios. To better manage expectations, regularly review and adjust the portfolio to align with changing market conditions and personal financial goals.

Asset classes Info

  • Stocks
    93%
  • Bonds
    4%
  • No data
    2%

The portfolio is predominantly invested in stocks, accounting for over 93% of the allocation, with minimal exposure to bonds and other asset classes. Such a heavy equity allocation is typical for growth-oriented portfolios, aiming for higher returns. However, it also increases exposure to market volatility. Compared to balanced benchmarks, this portfolio may benefit from a slight increase in bonds or alternative assets to cushion against downturns. Diversifying into non-equity asset classes can help stabilize returns and manage risk more effectively.

Sectors Info

  • Technology
    25%
  • Financials
    14%
  • Health Care
    11%
  • Consumer Discretionary
    10%
  • Industrials
    9%
  • Telecommunications
    8%
  • Basic Materials
    5%
  • Consumer Staples
    5%
  • Energy
    4%
  • Utilities
    3%
  • Real Estate
    2%
  • No data
    2%

Sector allocation reveals a strong concentration in technology, financial services, and healthcare, which are common in growth portfolios. The tech sector's 25% allocation is notable, reflecting its potential for high returns but also increased volatility, especially during interest rate changes. This sectoral focus aligns with growth trends but may expose the portfolio to sector-specific risks. Consider periodically reassessing sector weights and exploring sectors with lower current exposure to ensure balanced growth and mitigate potential sector downturns.

Regions Info

  • North America
    87%
  • Europe Developed
    5%
  • No data
    3%
  • Africa/Middle East
    2%
  • Japan
    1%

Geographically, the portfolio is heavily concentrated in North American assets, comprising over 87% of the allocation. This focus provides stability through investment in developed markets but limits exposure to potentially high-growth regions like Asia or emerging markets. Compared to global benchmarks, this geographic concentration might miss out on diversification benefits. To enhance global diversification, consider increasing allocations to underrepresented regions, which could provide additional growth opportunities and reduce reliance on the North American market.

Redundant positions Info

  • TIAA-CREF S&P 500 INDEX FUND INSTITUTIONAL CLASS
    VANGUARD GROWTH INDEX FUND ADMIRAL SHARES
    BlackRock S&P 500 Stock Fund Instl
    VANGUARD 500 INDEX FUND ADMIRAL SHARES
    VANGUARD TOTAL STOCK MARKET INDEX FUND ADMIRAL SHARES
    VANGUARD MID-CAP INDEX FUND ADMIRAL SHARES
    VANGUARD SMALL-CAP INDEX FUND INSTITUTIONAL SHARES
    High correlation
  • iShares Core Dividend Growth ETF
    JPMORGAN EQUITY INCOME FUND CLASS R6
    Schwab U.S. Dividend Equity ETF
    High correlation

The portfolio contains several highly correlated assets, particularly among U.S. equity funds, which can limit diversification benefits. Correlated assets tend to move in the same direction, reducing the portfolio's ability to withstand market fluctuations. To improve diversification, consider replacing some of the overlapping funds with those that have different market focuses or strategies. This approach can help manage risk and optimize returns by ensuring that not all assets react similarly to market changes.

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 along the Efficient Frontier, which aims to achieve the best possible risk-return ratio. This involves adjusting current asset allocations to maximize returns for a given level of risk. However, optimization should consider the removal of highly correlated assets to enhance diversification benefits. Keep in mind that this process is based on historical data and assumptions, which may not perfectly predict future market conditions. Regularly revisit optimization strategies as market dynamics evolve.

Dividends Info

  • BlackRock S&P 500 Stock Fund Instl 0.80%
  • iShares Core Dividend Growth ETF 2.20%
  • JPMORGAN EQUITY INCOME FUND CLASS R6 8.40%
  • Schwab U.S. Dividend Equity ETF 3.60%
  • TIAA-CREF Bond Plus Fund - 4.90%
  • VANGUARD INTERMEDIATE-TERM BOND INDEX FUND INSTITUTIONAL SHARES 3.50%
  • VANGUARD 500 INDEX FUND ADMIRAL SHARES 0.90%
  • VANGUARD GROWTH INDEX FUND ADMIRAL SHARES 0.30%
  • VANGUARD MID-CAP INDEX FUND ADMIRAL SHARES 1.10%
  • VANGUARD INFLATION-PROTECTED SECURITIES FUND INSTITUTIONAL SHARES 2.50%
  • VANGUARD SMALL-CAP INDEX FUND INSTITUTIONAL SHARES 0.90%
  • VANGUARD TOTAL STOCK MARKET INDEX FUND ADMIRAL SHARES 0.90%
  • Weighted yield (per year) 1.65%

The portfolio's total yield stands at 1.65%, with notable contributions from funds like the JPMORGAN EQUITY INCOME FUND CLASS R6 and Schwab U.S. Dividend Equity ETF. Dividends provide a steady income stream, which can be reinvested for compounded growth. For growth-focused investors, dividends may not be the primary goal, but they offer a buffer during market downturns. Consider whether the current dividend yield aligns with your income needs or if a shift towards higher-yielding assets is warranted.

Ongoing product costs Info

  • BlackRock S&P 500 Stock Fund Instl 0.10%
  • iShares Core Dividend Growth ETF 0.08%
  • Fidelity Contrafund 0.39%
  • FIDELITY VALUE FUND FIDELITY VALUE FUND 0.84%
  • FIDELITY GROWTH COMPANY FUND CLASS K 0.65%
  • JPMORGAN EQUITY INCOME FUND CLASS R6 0.45%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • SCHWAB INTERNATIONAL INDEX FUND SELECT SHARES 0.06%
  • TIAA-CREF S&P 500 INDEX FUND INSTITUTIONAL CLASS 0.05%
  • VANGUARD INTERMEDIATE-TERM BOND INDEX FUND INSTITUTIONAL SHARES 0.05%
  • VANGUARD 500 INDEX FUND ADMIRAL SHARES 0.04%
  • VANGUARD GROWTH INDEX FUND ADMIRAL SHARES 0.05%
  • VANGUARD MID-CAP INDEX FUND ADMIRAL SHARES 0.05%
  • VANGUARD INFLATION-PROTECTED SECURITIES FUND INSTITUTIONAL SHARES 0.07%
  • VANGUARD SMALL-CAP INDEX FUND INSTITUTIONAL SHARES 0.04%
  • VANGUARD TOTAL STOCK MARKET INDEX FUND ADMIRAL SHARES 0.04%
  • Weighted costs total (per year) 0.25%

The portfolio's total expense ratio (TER) is 0.25%, which is relatively low and beneficial for long-term returns. Lower costs mean more of the investment returns are retained, compounding over time. This cost efficiency aligns well with best practices in portfolio management. However, always be vigilant about potential hidden fees or management costs. Regularly review and compare the expense ratios of current holdings with lower-cost alternatives to ensure cost-effectiveness without compromising on performance.

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