A concentrated growth-focused portfolio with low diversification and high exposure to large-cap U.S. stocks
Report created on Feb 16, 2025Risk profile
5/7
Diversification profile
2/5
Positions
-
SC Schwab U.S. Large-Cap Growth ETF
SCHG - US8085243009 50.00% -
SW Schwab S&P 500 Index Fund
SWPPX - US8085098551 50.00%
This portfolio consists of two main components: the Schwab U.S. Large-Cap Growth ETF and the Schwab S&P 500 Index Fund, each making up 50% of the portfolio. This composition indicates a concentrated focus on large-cap U.S. equities. While this structure aligns with a growth-oriented strategy, it lacks diversification across asset classes and geographic regions. A more diversified portfolio might include different asset types, such as bonds or international stocks, to potentially reduce risk and enhance stability over time.
Growth
Historically, the portfolio has demonstrated strong performance with a CAGR of 15.72%. This indicates robust growth over time, significantly outperforming many benchmarks. However, the maximum drawdown of -33.08% highlights the potential for significant losses during market downturns. Historical data can provide insights into potential performance, but it's important to remember that past performance doesn't guarantee future results. To mitigate drawdown risk, consider diversifying across more asset classes and geographies.
Projection
The portfolio's forward projection, using Monte Carlo simulation, suggests a wide range of potential outcomes. The simulation, which uses historical data to model future scenarios, shows a 50th percentile return of 667.6% and a 5th percentile return of 126.8%. While the average annualized return across simulations is promising at 17.43%, it's important to acknowledge that these projections are based on past data. Therefore, it's advisable to regularly review and adjust your portfolio to align with changing market conditions and personal goals.
Asset classes
- Stocks 100%
The portfolio's allocation is entirely in stocks, with no exposure to other asset classes like bonds or cash. This lack of diversification can lead to higher volatility, as stocks tend to be more sensitive to market fluctuations. Including other asset types could help balance the risk and provide more stable returns over time. For example, bonds typically offer lower returns but are less volatile, which can be beneficial during stock market downturns.
Sectors
- Technology 40%
- Telecommunications 11%
- Financials 10%
- Health Care 10%
- Consumer Discretionary 7%
- Industrials 5%
- Consumer Discretionary 5%
- Consumer Staples 4%
- Energy 2%
- Utilities 2%
- Basic Materials 2%
- Real Estate 1%
With 40% of the portfolio in technology, there's a significant sector concentration. While this sector has driven growth in recent years, it can be volatile, especially during periods of interest rate hikes or regulatory changes. Balancing exposure across more sectors, such as healthcare or consumer goods, could reduce sector-specific risks and enhance stability. This approach can provide a buffer against downturns in any single sector.
Regions
- North America 100%
The portfolio is heavily weighted towards North America, with no exposure to other regions. This geographic concentration can limit diversification benefits and increase vulnerability to regional economic downturns. Consider expanding into international markets to diversify geographic risk. Exposure to Europe or Asia could provide growth opportunities and help hedge against potential U.S. market volatility.
Market capitalization
- Mega-cap 56%
- Large-cap 29%
- Mid-cap 15%
- Small-cap 1%
The portfolio is predominantly invested in mega-cap stocks, which make up 56% of the allocation. While these companies tend to be stable and well-established, they may offer lower growth potential compared to smaller-cap stocks. Including more mid-cap or small-cap stocks could enhance growth potential and further diversify the portfolio. This approach can capture emerging growth opportunities and reduce reliance on large-cap performance.
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's current allocation can be optimized using the Efficient Frontier, which aims to achieve the best possible risk-return ratio. This involves adjusting the weights of existing assets to enhance performance without adding new investments. While the portfolio's focus on large-cap growth aligns with its growth profile, exploring different allocations within the same asset class could improve efficiency and better align with your risk tolerance and return objectives.
Dividends
- Schwab U.S. Large-Cap Growth ETF 0.40%
- Schwab S&P 500 Index Fund 1.20%
- Weighted yield (per year) 0.80%
The portfolio's dividend yield is relatively low at 0.80%, reflecting its growth-oriented focus. While dividends can provide a steady income stream, this portfolio prioritizes capital appreciation over income generation. For investors seeking higher income, consider adding dividend-focused investments or increasing exposure to sectors known for higher yields, such as utilities or consumer staples.
Ongoing product costs
- Schwab U.S. Large-Cap Growth ETF 0.04%
- Schwab S&P 500 Index Fund 0.02%
- Weighted costs total (per year) 0.03%
The portfolio benefits from impressively low costs, with a total expense ratio (TER) of 0.03%. This cost efficiency supports better long-term performance by minimizing the drag on returns. Keeping costs low is a key component of successful investing, as even small reductions in fees can significantly impact returns over time. Continue to monitor expenses and seek cost-effective investment options to maximize net returns.
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