A growth-oriented portfolio with high US exposure and limited diversification

Report created on Jan 2, 2025

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

This portfolio is heavily weighted towards US equities, with 50% in the Vanguard S&P 500 ETF, 30% in the iShares Core S&P Mid-Cap ETF, and 20% in the iShares Core S&P Small-Cap ETF. Such a composition emphasizes large, mid, and small-cap stocks, providing exposure across different market capitalizations but lacks asset class diversification. Compared to a more diversified benchmark, this portfolio is concentrated in equities. Consider incorporating other asset classes like bonds or international equities to reduce risk and enhance diversification.

Growth Info

Historically, the portfolio has performed well, boasting a Compound Annual Growth Rate (CAGR) of 12.79%. However, it also experienced a significant maximum drawdown of -37.52%, indicating potential volatility. When compared to a broader benchmark, the returns are competitive, but the drawdown suggests a need for caution. While past performance is not indicative of future results, it highlights the importance of balancing growth with risk management strategies.

Projection Info

Monte Carlo simulations, which use historical data to project future outcomes, show a wide range of potential returns for this portfolio. With a median return of 336.77% and a 5th percentile of 17.09%, the projections indicate both high reward and risk. These simulations, however, rely on historical data and assumptions that may not hold in the future. To mitigate uncertainty, consider regular portfolio reviews and adjustments based on changing market conditions and personal financial goals.

Asset classes Info

  • Stocks
    100%

The portfolio is almost entirely composed of stocks, with a minuscule cash allocation of 0.2%. This heavy stock allocation can lead to significant growth but also increases exposure to market volatility. Compared to a more balanced portfolio, this approach lacks diversification benefits that bonds or other asset classes might offer. To improve risk-adjusted returns, consider including other asset classes to provide stability and income during market downturns.

Sectors Info

  • Technology
    23%
  • Financials
    15%
  • Industrials
    13%
  • Consumer Discretionary
    12%
  • Health Care
    11%
  • Telecommunications
    6%
  • Real Estate
    5%
  • Consumer Staples
    5%
  • Energy
    4%
  • Basic Materials
    3%
  • Utilities
    2%

Sector allocation is fairly diversified, with notable concentrations in technology (23.23%), financial services (14.98%), and industrials (13.47%). This aligns closely with typical market benchmarks, suggesting a balanced sector exposure. However, the tech-heavy component may lead to increased volatility, especially during periods of interest rate hikes. To manage sector risks, regularly review and adjust sector weights to align with market trends and economic forecasts.

Regions Info

  • North America
    99%
  • Europe Developed
    1%

Geographically, the portfolio is overwhelmingly focused on North America, with 99.12% of assets in this region. This concentration limits exposure to international markets, potentially missing out on growth opportunities in emerging markets. Compared to global benchmarks, this lack of geographic diversification could increase risk if the US market underperforms. Consider broadening geographic exposure to include regions like Europe and Asia for enhanced diversification.

Redundant positions Info

  • iShares Core S&P Small-Cap ETF
    iShares Core S&P Mid-Cap ETF
    High correlation

The portfolio contains highly correlated assets, particularly between the iShares Core S&P Small-Cap and Mid-Cap ETFs. High correlation means these assets tend to move together, reducing diversification benefits. During market downturns, this can amplify losses. To improve diversification, consider replacing one of these ETFs with an asset that has a lower correlation to the rest of the portfolio, potentially improving overall risk management.

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 using the Efficient Frontier, focusing on achieving the best possible risk-return ratio. Currently, overlapping assets reduce diversification benefits. By adjusting the allocation among existing assets or introducing new ones, the portfolio's expected return could increase to 14.11% without raising risk levels. However, remember that efficiency focuses on risk-return balance, not necessarily diversification or other goals.

Dividends Info

  • iShares Core S&P Mid-Cap ETF 1.30%
  • iShares Core S&P Small-Cap ETF 2.00%
  • Vanguard S&P 500 ETF 1.20%
  • Weighted yield (per year) 1.39%

The portfolio's dividend yield stands at 1.39%, with contributions from each ETF. While dividends provide a steady income stream, the yield is relatively modest compared to income-focused portfolios. For growth-oriented investors, dividends may not be a primary concern, but they can still offer some downside protection and income stability. If income generation becomes a priority, consider increasing exposure to higher-yielding assets.

Ongoing product costs Info

  • iShares Core S&P Mid-Cap ETF 0.05%
  • iShares Core S&P Small-Cap ETF 0.06%
  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.04%

The portfolio's costs are impressively low, with a Total Expense Ratio (TER) of 0.04%. This is well below industry averages, supporting better long-term performance by minimizing the drag on returns. Low costs are a significant advantage, as they allow more of the portfolio's growth to compound over time. Maintaining this cost efficiency is crucial, so continue to evaluate and ensure that high-fee assets do not creep into the portfolio.

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