A growth-focused portfolio with strong U.S. exposure and moderate diversification

Report created on Jan 25, 2025

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

The portfolio is primarily composed of ETFs, with a significant 70% allocation to the Vanguard Total Stock Market Index Fund ETF. This high concentration in a single fund suggests a focus on broad U.S. market exposure. The remaining 30% is distributed among four other ETFs, with varying focuses such as dividend growth and small-cap value. Compared to a benchmark, this structure leans heavily towards U.S. equities, indicating a growth-oriented strategy. While the composition is straightforward, it may benefit from further diversification into other asset classes like bonds or alternatives to enhance stability.

Growth Info

Historically, the portfolio has performed well, with a Compound Annual Growth Rate (CAGR) of 15.77%. This suggests strong growth, but it’s important to note the maximum drawdown of -35.31%, indicating significant volatility during downturns. Compared to benchmarks, this performance aligns with growth-focused portfolios, which typically exhibit higher returns and risks. This historical data, however, does not guarantee future results. Consider maintaining a balance between high-growth assets and more stable investments to potentially reduce drawdowns while still capturing growth.

Projection Info

Monte Carlo simulations, which use historical data to project future outcomes, show a wide range of potential returns for the portfolio. With a 5th percentile outcome of 44.7% and a 67th percentile of 666.7%, the results highlight the inherent uncertainty in future performance. The portfolio's median projected return is 428.8%, indicating a positive outlook. However, due to the reliance on historical data, these projections should be interpreted cautiously. Regular reviews and adjustments based on market conditions and personal goals can help align the portfolio with desired outcomes.

Asset classes Info

  • Stocks
    100%

The portfolio is entirely allocated to stocks, with no exposure to bonds or other asset classes. This 100% equity allocation aligns with the growth profile but lacks the diversification that other asset classes can provide. Typically, including bonds or other non-equity investments can help reduce volatility and provide income during market downturns. Comparing to benchmarks, this portfolio is more aggressive. To enhance diversification, consider incorporating a small percentage of bonds or alternative assets, which could help balance risk and return.

Sectors Info

  • Technology
    27%
  • Financials
    16%
  • Health Care
    11%
  • Consumer Discretionary
    11%
  • Industrials
    10%
  • Telecommunications
    7%
  • Consumer Staples
    7%
  • Energy
    5%
  • Utilities
    3%
  • Basic Materials
    2%
  • Real Estate
    2%

The sector allocation is heavily weighted towards technology at 27%, followed by financial services and healthcare. This allocation reflects a growth-oriented approach, as these sectors have historically driven market gains. However, such concentration can lead to increased volatility, especially during sector-specific downturns. Compared to common benchmarks, this portfolio may be overexposed to tech, which can be risky during interest rate hikes. Consider reviewing sector allocations periodically to ensure they align with your risk tolerance and market outlook.

Regions Info

  • North America
    95%
  • Europe Developed
    2%
  • Asia Emerging
    1%
  • Japan
    1%
  • Asia Developed
    1%

Geographically, the portfolio is predominantly focused on North America, with 95% exposure. This heavy U.S. focus suggests confidence in the domestic market but limits diversification benefits from international exposure. Compared to benchmarks, this allocation is more concentrated, which could increase vulnerability to U.S. market-specific risks. To enhance geographic diversification, consider gradually increasing exposure to international markets, particularly in regions with emerging growth potential, which can provide a buffer against domestic downturns.

Market capitalization Info

  • Mega-cap
    34%
  • Large-cap
    34%
  • Mid-cap
    19%
  • Small-cap
    8%
  • Micro-cap
    4%

The portfolio's market capitalization exposure is well-distributed across mega, big, medium, small, and micro-cap stocks, with a bias towards larger caps. This distribution provides a balance between stability from large caps and growth potential from smaller caps. Compared to benchmarks, this allocation is typical of a diversified equity portfolio. However, the relatively lower allocation to small and micro caps may limit upside potential. Consider adjusting the balance slightly to capture more growth opportunities without significantly increasing risk.

Redundant positions Info

  • iShares Core Dividend Growth ETF
    Schwab U.S. Dividend Equity ETF
    High correlation

The portfolio contains highly correlated assets, particularly between the iShares Core Dividend Growth ETF and Schwab U.S. Dividend Equity ETF. High correlation means these assets tend to move together, which can limit diversification benefits. In times of market stress, this lack of diversification may lead to more pronounced losses. To optimize risk management, consider reducing exposure to one of these ETFs or replacing it with a less correlated asset, thereby enhancing the portfolio's resilience to market fluctuations.

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.

Utilizing the Efficient Frontier concept, this portfolio can potentially be optimized by adjusting the current asset allocation to achieve the best possible risk-return ratio. However, before optimizing, consider removing highly correlated assets, as their overlap offers limited diversification benefits. The goal is to balance risk and return effectively without necessarily seeking maximum diversification. By focusing on the current assets and reallocating among them, you can enhance the portfolio's efficiency, ensuring it meets your growth objectives while managing risk.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.60%
  • iShares Core Dividend Growth ETF 2.20%
  • Schwab U.S. Dividend Equity ETF 3.50%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.20%
  • Vanguard Total International Stock Index Fund ETF Shares 3.30%
  • Weighted yield (per year) 1.59%

The portfolio's dividend yield stands at 1.59%, with the Schwab U.S. Dividend Equity ETF contributing the highest yield at 3.50%. Dividends provide a steady income stream and can be reinvested for compound growth. For a growth-focused portfolio, dividends are a secondary consideration. However, they can offer stability during market downturns. Compared to other growth portfolios, this yield is moderate. Consider maintaining or slightly increasing dividend-focused investments to balance growth with income, especially if portfolio stability becomes a priority.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • iShares Core Dividend Growth ETF 0.08%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.05%

The portfolio's total expense ratio (TER) is impressively low at 0.05%, which is beneficial for long-term performance. Low costs mean more of your investment returns stay in your pocket, compounding over time. Compared to industry averages, this TER is highly competitive, indicating cost efficiency. This alignment with best practices supports the portfolio's growth potential. To maintain this advantage, regularly review and compare the costs of current holdings with new investment opportunities to ensure continued cost-effectiveness.

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