Growth-Oriented US-Centric Portfolio with Low Diversification and High Correlation Among Assets

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.

What type of investor this portfolio is suitable for

Growth Investors

This portfolio is best suited for growth-oriented investors with a higher risk tolerance and a long-term investment horizon. Such investors are typically focused on capital appreciation rather than immediate income generation. They are comfortable with market volatility and are willing to endure short-term fluctuations for the potential of higher long-term returns. These investors should have a strong understanding of market dynamics and be prepared to adjust their portfolio as needed to align with changing financial goals and risk profiles.

Positions

  • Vanguard S&P 500 ETF
    VOO - US9229083632
    60.00%
  • Avantis® U.S. Small Cap Value ETF
    AVUV - US0250728773
    20.00%
  • Pacer US Cash Cows 100 ETF
    COWZ - US69374H8815
    10.00%
  • Invesco S&P MidCap Quality ETF
    XMHQ - US46137V4721
    10.00%

The portfolio is composed entirely of ETFs, with a heavy focus on US equities. The Vanguard S&P 500 ETF dominates at 60%, followed by the Avantis U.S. Small Cap Value ETF at 20%. The Pacer US Cash Cows 100 ETF and Invesco S&P MidCap Quality ETF each hold a 10% share. This setup indicates a strong tilt towards large-cap and small-cap equities, with a minor allocation to mid-cap stocks. The lack of diversity outside of the US market and limited asset classes could expose the portfolio to concentrated risk, particularly in the event of a US market downturn.

Growth Info

Historically, the portfolio has delivered an impressive CAGR of 18.35%, showcasing its growth potential. However, it has also experienced a significant max drawdown of 37.02%, indicating periods of high volatility. The fact that 90% of returns are concentrated in just 18 days suggests a reliance on a few key performance periods. This volatility might be concerning for investors not prepared for such fluctuations, and it highlights the importance of maintaining a long-term investment horizon to weather short-term market swings.

Projection Info

Using a Monte Carlo simulation with 1,000 iterations, the portfolio's future performance was analyzed. This method models potential outcomes by accounting for randomness and variability in returns. The results show a median expected growth of 925.56% in portfolio value, with a 5% chance of achieving at least 114.62% and a 67% chance of reaching 1,426.78%. With an annualized return of 20.91% across simulations, the projections suggest robust growth potential, albeit with inherent risks. Investors should remain aware of the variability in outcomes and consider their risk tolerance when assessing these projections.

Asset classes Info

  • Stocks
    100%
  • Cash
    0%

The portfolio is heavily skewed towards equities, with 99.92% in stocks and a negligible 0.08% in cash. This concentration in a single asset class reflects a high-risk, high-reward strategy, suitable for those seeking capital appreciation over income generation or capital preservation. While this can drive substantial growth, it also increases exposure to market volatility. To mitigate risk, investors might consider diversifying into other asset classes, such as bonds or alternative investments, to balance the portfolio and reduce susceptibility to equity market downturns.

Sectors Info

  • Technology
    25%
  • Financials
    15%
  • Industrials
    13%
  • Consumer Discretionary
    13%
  • Health Care
    9%
  • Energy
    8%
  • Telecommunications
    6%
  • Consumer Staples
    6%
  • Basic Materials
    4%
  • Utilities
    2%
  • Real Estate
    1%

Sector allocation reveals a strong emphasis on technology, financial services, and industrials, making up over 50% of the portfolio. While these sectors have been strong performers, the concentration could expose the portfolio to sector-specific risks. A downturn in any of these industries could significantly impact overall returns. Diversifying across a broader range of sectors could help mitigate these risks and enhance stability. Consideration should be given to sectors with different economic drivers to ensure a more balanced risk-reward profile.

Regions Info

  • North America
    99%
  • Europe Developed
    0%
  • Latin America
    0%
  • Asia Emerging
    0%
  • Asia Developed
    0%
  • Africa/Middle East
    0%

Geographically, the portfolio is overwhelmingly concentrated in North America, with a staggering 99.03% allocation. This lack of international exposure could lead to missed opportunities in growing markets outside the US. Additionally, it increases vulnerability to US-specific economic or political events. Introducing more global diversification could enhance returns and reduce risk by capitalizing on growth opportunities in other regions. Investors might explore options that include emerging markets or developed regions outside North America to achieve a more balanced geographic distribution.

Redundant positions Info

  • Pacer US Cash Cows 100 ETF
    Invesco S&P MidCap Quality ETF
    Avantis® U.S. Small Cap Value ETF
    High correlation

The portfolio exhibits high correlation among its assets, particularly between the Pacer US Cash Cows 100 ETF, Invesco S&P MidCap Quality ETF, and Avantis U.S. Small Cap Value ETF. This correlation suggests that these ETFs tend to move in the same direction, limiting diversification benefits. While correlation can amplify returns during market upswings, it can also exacerbate losses during downturns. To enhance diversification, consider incorporating assets with low or negative correlations to existing holdings, which can help stabilize returns and reduce overall portfolio volatility.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.50%
  • Pacer US Cash Cows 100 ETF 1.80%
  • Vanguard S&P 500 ETF 1.20%
  • Invesco S&P MidCap Quality ETF 4.80%
  • Weighted yield (per year) 1.68%

The portfolio offers a modest total dividend yield of 1.68%, with the Invesco S&P MidCap Quality ETF contributing the highest yield at 4.8%. While dividends provide a steady income stream, the overall yield is relatively low, reflecting the portfolio's growth focus. Investors seeking income might find this yield insufficient. To increase income potential, consider reallocating some assets towards higher-yielding investments, such as dividend-focused funds or stocks. Balancing growth and income can provide a more comprehensive investment approach, catering to both capital appreciation and income generation needs.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Pacer US Cash Cows 100 ETF 0.49%
  • Vanguard S&P 500 ETF 0.03%
  • Invesco S&P MidCap Quality ETF 0.25%
  • Weighted costs total (per year) 0.14%

The portfolio's total expense ratio (TER) stands at an attractive 0.14%, reflecting the cost-efficiency of the selected ETFs. The Vanguard S&P 500 ETF, with an expense ratio of 0.03%, significantly contributes to keeping costs low. Lower costs enhance net returns, making this aspect a strength of the portfolio. Maintaining a focus on cost-effective investment options is crucial for optimizing long-term performance. While costs are currently well-managed, investors should remain vigilant about expense ratios and consider their impact on overall returns when making future investment decisions.

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.

Before optimizing the portfolio, attention should be given to reducing asset overlap that contributes to high correlation. By eliminating redundant holdings, the portfolio can achieve better diversification. Once this is addressed, investors can consider moving along the efficient frontier to adjust risk levels. To increase risk, allocate more towards equities with higher volatility. To adopt a more conservative stance, consider incorporating bonds or other low-risk assets. This strategic adjustment can help tailor the portfolio to better align with individual risk tolerance and financial objectives.

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