A growth-focused portfolio with high US exposure and notable sector concentration

Report created on Dec 21, 2024

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

The portfolio is heavily weighted towards equities, with a significant 67% allocation to the Vanguard Total Stock Market Index Fund ETF. This concentration suggests a focus on broad market exposure, primarily within the US. The remaining allocation includes mid-cap, small-cap, and large-cap growth ETFs, each at 11%. This composition leans towards growth, but lacks diversification, as it is heavily concentrated in one asset class and geography. To enhance diversification, consider including other asset classes like bonds or international equities, which could reduce risk and improve stability.

Growth Info

Historically, the portfolio has performed well, achieving a Compound Annual Growth Rate (CAGR) of 13.9%. This suggests strong growth potential, but with a notable maximum drawdown of -34.93%, indicating significant volatility. This performance is typical for growth-oriented portfolios, which often experience larger swings in value. While past performance is not a guarantee of future results, the historical trend provides a useful benchmark. Consider strategies to manage downside risk, such as diversifying across different asset classes or incorporating defensive positions to cushion against market downturns.

Projection Info

Monte Carlo simulations, which use historical data to model potential future outcomes, show promising projections with a median return of 479.24% over time. However, it's crucial to note that these projections are based on historical data and assume past trends will continue. While the simulations are optimistic, they highlight the importance of understanding the assumptions behind these models. Regularly reviewing and adjusting the portfolio to align with changing market conditions can help maintain the likelihood of achieving desired outcomes.

Asset classes Info

  • Stocks
    100%

The portfolio is almost entirely allocated to stocks, with over 99% in equities and a negligible cash position. This allocation is typical for a growth-focused strategy, aiming for high returns. However, such a heavy equity allocation can expose the portfolio to significant risk during market downturns. Diversifying into other asset classes, like bonds or real estate, could help mitigate risk by providing a buffer against equity volatility. A balanced approach can enhance the risk-return profile, ensuring the portfolio remains resilient in varied market conditions.

Sectors Info

  • Technology
    30%
  • Consumer Discretionary
    12%
  • Financials
    12%
  • Industrials
    11%
  • Health Care
    11%
  • Telecommunications
    8%
  • Consumer Staples
    5%
  • Energy
    4%
  • Real Estate
    3%
  • Basic Materials
    2%
  • Utilities
    2%

The portfolio shows a strong bias towards the technology sector, making up nearly 30% of the allocation. While tech stocks have driven substantial growth, they also come with heightened volatility, especially during periods of economic uncertainty or rising interest rates. Other sectors like consumer cyclicals and financial services are also notable, but the concentration in tech suggests a potential vulnerability to sector-specific risks. Balancing sector exposure by increasing allocation to defensive sectors, such as utilities or healthcare, could provide more stability.

Regions Info

  • North America
    100%

Geographically, the portfolio is overwhelmingly invested in North America, with over 99% exposure. This lack of international diversification can limit the portfolio's ability to benefit from growth in other regions. While US markets have performed well historically, incorporating global equities could provide exposure to diverse economic cycles and growth opportunities. Consider gradually increasing allocations to developed and emerging markets to enhance geographic diversification and reduce reliance on the US economy.

Redundant positions Info

  • Vanguard Total Stock Market Index Fund ETF Shares
    Schwab U.S. Large-Cap Growth ETF
    High correlation

The portfolio contains highly correlated assets, particularly the Vanguard Total Stock Market Index Fund ETF and the Schwab U.S. Large-Cap Growth ETF. High correlation means these assets tend to move in the same direction, which can limit diversification benefits. During market downturns, correlated assets may decline simultaneously, increasing portfolio risk. To improve diversification, consider replacing one of these ETFs with an asset that has a lower correlation, potentially from a different asset class or geographic region.

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 Efficient Frontier can help optimize the portfolio's risk-return balance by adjusting the allocation among existing assets. However, before optimization, it's crucial to address the high correlation between some assets, which may limit diversification. By reducing overlap and incorporating assets with different risk-return profiles, the portfolio can move closer to the Efficient Frontier. This approach aims to achieve the best possible return for a given level of risk, enhancing overall efficiency.

Dividends Info

  • iShares Morningstar Mid-Cap Growth ETF 0.50%
  • Invesco S&P SmallCap 600 Revenue ETF 0.90%
  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.90%
  • Weighted yield (per year) 0.80%

With a total dividend yield of 0.8%, the portfolio's income generation is modest, reflecting its growth-oriented strategy. Dividends can provide a steady income stream, which is particularly valuable during periods of market volatility. For investors seeking income, exploring higher-yielding assets or dividend-focused funds could enhance cash flow. However, the focus on growth suggests dividends are not a primary concern, so maintaining a balance between growth and income objectives is crucial.

Ongoing product costs Info

  • iShares Morningstar Mid-Cap Growth ETF 0.06%
  • Invesco S&P SmallCap 600 Revenue ETF 0.39%
  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Weighted costs total (per year) 0.07%

The portfolio's total expense ratio (TER) is impressively low at 0.07%, which is beneficial for long-term performance as lower costs mean more of the returns are retained. The expense ratios of the individual ETFs are also competitive, with most under 0.1%. Keeping costs low is a key advantage, as it enhances the compounding effect over time. While the current cost structure is favorable, regularly reviewing and comparing fees with alternative funds can ensure the portfolio remains cost-efficient.

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