Growth-focused portfolio with high concentration in North American equities and limited diversification

Report created on Dec 21, 2024

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 individual stocks and ETFs, with Amazon.com Inc. making up 34.9% of the holdings. This concentration in a single stock may expose the portfolio to higher volatility compared to a more balanced allocation. Common benchmarks suggest a more diversified mix of stocks, bonds, and other asset classes to manage risk. Consider diversifying into additional asset classes to reduce reliance on a few high-performing stocks and ETFs. This can help mitigate potential downturns in specific sectors or companies.

Growth Info

Historically, the portfolio has shown an impressive Compound Annual Growth Rate (CAGR) of 21.4%. However, it has also experienced a significant maximum drawdown of -43.36%. While high growth is attractive, the drawdown indicates substantial volatility. Comparing this to a benchmark like the S&P 500, which typically has a lower drawdown, suggests a need for balance. To maintain growth while reducing risk, consider diversifying holdings and possibly incorporating assets with lower volatility, such as bonds or international equities.

Projection Info

A Monte Carlo simulation, which uses historical data to predict future outcomes, shows promising potential for the portfolio with a median growth of 1,032.91%. However, it's important to note that past performance is not a guarantee of future results. The simulation's reliance on historical trends may not account for future market changes. To enhance reliability, regularly review and adjust the portfolio based on current economic conditions and personal financial goals. This proactive approach can help align the portfolio with evolving market dynamics.

Asset classes Info

  • Stocks
    100%

The portfolio is predominantly composed of stocks, comprising over 99% of the total allocation. This lack of diversification across asset classes increases exposure to equity market volatility. Common investment strategies recommend a mix of stocks, bonds, and potentially alternative investments to balance risk and return. Introducing fixed-income securities or other asset classes could offer stability and reduce overall portfolio risk. This diversification can help cushion against market downturns and provide more consistent returns over time.

Sectors Info

  • Consumer Discretionary
    40%
  • Financials
    23%
  • Technology
    17%
  • Health Care
    5%
  • Telecommunications
    4%
  • Industrials
    4%
  • Consumer Staples
    3%
  • Energy
    1%
  • Utilities
    1%
  • Basic Materials
    1%
  • Real Estate
    1%

The portfolio is heavily concentrated in consumer cyclicals, financial services, and technology sectors. Such concentration can lead to increased volatility, especially if these sectors face economic headwinds. For instance, consumer cyclicals can be sensitive to economic downturns, while tech stocks might fluctuate with interest rate changes. Balancing sector exposure by adding underrepresented areas like healthcare or utilities could enhance stability. A diversified sector allocation aligns with benchmark practices and mitigates sector-specific risks.

Regions Info

  • North America
    100%

The portfolio's geographic allocation is overwhelmingly focused on North America, with 99.76% exposure. This concentration limits the benefits of global diversification, which can reduce risk by spreading investments across different economic environments. Common benchmarks often include a mix of international equities to capture growth opportunities in diverse markets. Consider increasing exposure to developed and emerging markets outside North America to enhance diversification. This broader geographic reach can help mitigate regional economic fluctuations.

Redundant positions Info

  • Vanguard Russell 1000 Growth Index Fund ETF Shares
    Vanguard Dividend Appreciation Index Fund ETF Shares
    Vanguard S&P 500 ETF
    High correlation

The portfolio contains highly correlated assets, particularly among the Vanguard ETFs. High correlation means these assets tend to move together, reducing diversification benefits. In market downturns, correlated assets may all decline simultaneously, increasing portfolio risk. To enhance diversification, consider including assets with lower correlation, such as international stocks or bonds. This approach can help stabilize returns and reduce overall portfolio volatility, aligning with risk management best practices.

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 be optimized using the Efficient Frontier, which seeks the best risk-return ratio based on current assets. However, the presence of highly correlated assets limits diversification and efficiency. Before optimizing, consider removing overlapping assets that don't contribute to diversification. Reallocating to less correlated investments can enhance risk management and potentially improve returns. This strategic adjustment aligns with the goal of achieving the most efficient portfolio configuration.

Dividends Info

  • Visa Inc. Class A 0.70%
  • Vanguard Dividend Appreciation Index Fund ETF Shares 1.30%
  • Vanguard Russell 1000 Growth Index Fund ETF Shares 0.40%
  • Vanguard S&P 500 ETF 0.90%
  • Weighted yield (per year) 0.54%

The portfolio's dividend yield is relatively low at 0.54%, reflecting its focus on growth rather than income. While growth stocks can offer substantial capital appreciation, dividends provide a steady income stream and can cushion against market volatility. For investors seeking income, increasing holdings in dividend-paying stocks or funds could enhance cash flow. Balancing growth and income investments can provide a more stable financial foundation, particularly for those nearing retirement or needing regular income.

Ongoing product costs Info

  • Vanguard Dividend Appreciation Index Fund ETF Shares 0.06%
  • Vanguard Russell 1000 Growth Index Fund ETF Shares 0.08%
  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.02%

The portfolio benefits from impressively low costs, with a total expense ratio (TER) of 0.02%. This cost efficiency supports better long-term performance by minimizing the impact of fees on returns. Low-cost investments, like Vanguard ETFs, are a positive alignment with best practices for cost-effective investing. Maintaining focus on low-cost options while ensuring diversification can enhance portfolio returns over time. Regularly reviewing and optimizing cost structures can further improve financial outcomes.

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