Growth-focused portfolio with strong tech tilt and low geographic diversity

Report created on Jan 13, 2025

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 60% allocation to the Vanguard S&P 500 ETF. This focus on large-cap U.S. stocks suggests a preference for stability and growth. However, the portfolio's low diversification score indicates a concentration risk, which might expose it to volatility. It lacks significant exposure to bonds or international markets, which are often included to balance risk and return. To enhance diversification, consider adding different asset classes, such as bonds or international equities, which can reduce overall risk and improve resilience against market downturns.

Growth Info

Historically, the portfolio has shown a strong CAGR of 18.07%, indicating robust growth over time. However, a max drawdown of -34.52% highlights potential vulnerability during market downturns. This performance reflects the high-risk, high-reward nature of the portfolio. When compared to benchmarks like the S&P 500, the returns are impressive, but they come with increased risk. To mitigate this, consider strategies that reduce volatility, such as adding defensive assets or reallocating towards sectors that perform well during economic downturns.

Projection Info

The Monte Carlo simulation, which uses historical data to forecast potential outcomes, predicts a wide range of future returns. With a median projection of 913.66% and a 5th percentile of 130.09%, the portfolio shows promise but also uncertainty. While 992 out of 1,000 simulations resulted in positive returns, this is not a guarantee of future performance. The high variability suggests a need for cautious optimism. To improve predictability, consider diversifying asset classes and geographic exposure, which can stabilize returns against unforeseen market changes.

Asset classes Info

  • Stocks
    100%

The portfolio is almost entirely composed of stocks, with a negligible cash position. This heavy equity exposure aligns with a growth-focused strategy but limits diversification. Compared to a balanced benchmark, which might include bonds or real estate, this portfolio is more volatile. To align with best practices, consider incorporating other asset classes like fixed income, which can provide stability and income during market fluctuations. This adjustment could enhance risk-adjusted returns and offer a buffer in volatile markets.

Sectors Info

  • Technology
    38%
  • Financials
    13%
  • Consumer Discretionary
    10%
  • Health Care
    9%
  • Telecommunications
    8%
  • Industrials
    7%
  • Consumer Staples
    5%
  • Energy
    4%
  • Basic Materials
    2%
  • Utilities
    2%
  • Real Estate
    2%

With a 38.08% allocation in technology, the portfolio is tech-heavy, which can lead to higher volatility, especially during interest rate hikes. Other sectors like financial services and consumer cyclicals are represented but less prominently. This sector concentration may result in significant performance swings based on tech industry trends. To mitigate risk, consider a more balanced sector allocation by increasing exposure to defensive sectors like utilities or consumer staples, which tend to be less affected by economic cycles.

Regions Info

  • North America
    99%

The portfolio's geographic allocation is overwhelmingly North American at 99.29%, with minimal exposure to other regions. This lack of international diversification can increase vulnerability to U.S. market-specific risks. Compared to global benchmarks, which typically include a mix of regions, this portfolio is under-diversified. Expanding geographic exposure to regions like Europe or Asia could reduce risk and capture growth opportunities in emerging markets. This adjustment can protect against regional economic downturns and enhance long-term growth potential.

Redundant positions Info

  • Schwab U.S. Large-Cap Growth ETF
    Vanguard Information Technology Index Fund ETF Shares
    High correlation

The portfolio includes highly correlated assets like the Schwab U.S. Large-Cap Growth ETF and Vanguard Information Technology Index Fund ETF Shares, which move together in similar market conditions. This high correlation limits diversification benefits and can increase risk during downturns. Diversification relies on having assets that perform differently in various market environments. To optimize risk management, consider replacing one of the correlated assets with an uncorrelated or inversely correlated asset, which can stabilize portfolio returns during volatile periods.

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 potentially be optimized using the Efficient Frontier, which aims to achieve the best possible risk-return ratio. However, the current asset allocation and high correlation between some assets limit diversification benefits. By adjusting the allocation, particularly by reducing correlated assets, the portfolio could achieve a more efficient balance between risk and return. This optimization focuses on maximizing returns for a given level of risk, without necessarily increasing diversification. Consider exploring alternative assets that can enhance efficiency.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.60%
  • Schwab U.S. Dividend Equity ETF 3.70%
  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • Vanguard Information Technology Index Fund ETF Shares 0.60%
  • Vanguard S&P 500 ETF 1.30%
  • Weighted yield (per year) 1.24%

The portfolio’s total dividend yield is 1.24%, with the Schwab U.S. Dividend Equity ETF contributing the highest yield at 3.7%. While dividends provide a steady income stream, the overall yield is modest due to the growth-oriented focus. For investors seeking regular income, a higher allocation to dividend-paying assets might be beneficial. However, given the growth profile, dividends are less of a priority. If income is a goal, consider reallocating towards higher-yielding assets without compromising growth potential.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • Vanguard Information Technology Index Fund ETF Shares 0.10%
  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.06%

The portfolio's Total Expense Ratio (TER) is impressively low at 0.06%, indicating cost-efficient management. Low costs are crucial for long-term returns, as they reduce the drag on performance. Compared to industry averages, these fees are highly competitive, allowing more of the portfolio's returns to be reinvested. Maintaining low costs should remain a priority. Regularly review and compare fees to ensure they remain competitive. If high-fee assets offer no additional benefits, consider replacing them with lower-cost alternatives.

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