Moderate Risk Growth Portfolio with Low Diversification and Heavy North American Focus

Report created on Dec 2, 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 tilted towards equities, with an overwhelming 99.77% allocation in stocks. It mainly comprises ETFs with a significant portion in the iShares Core S&P 500 ETF, making up 41.63% of the portfolio. This indicates a strong focus on large-cap U.S. equities. The inclusion of Microsoft Corporation adds a single stock exposure, which is relatively high at 13.52%. The overall composition suggests a growth-oriented strategy, but with low diversification, it may be exposed to specific market risks. To optimize, consider adding other asset classes like bonds to balance the risk.

Growth Info

Historically, the portfolio has performed well, boasting a compound annual growth rate (CAGR) of 18.89%. However, it experienced a significant maximum drawdown of -34.31%, which highlights its vulnerability during market downturns. The fact that 90% of returns are concentrated in just 18 days points to high volatility. This performance indicates strong growth potential but also suggests susceptibility to market fluctuations. To mitigate the impact of such downturns, consider diversifying across different asset classes and possibly including more defensive investments to stabilize returns.

Projection Info

The Monte Carlo simulation, which uses random sampling to project future returns, suggests a wide range of potential outcomes for the portfolio. With a hypothetical initial investment, the 5th percentile projects a modest return of 106.01%, while the median (50th percentile) reaches 763.2%, and the 67th percentile soars to 1,256.16%. This indicates a high probability of positive returns, with 986 out of 1,000 simulations yielding gains. Despite the optimistic outlook, the variability underscores the importance of maintaining a balanced risk profile to navigate potential market volatility effectively.

Asset classes Info

  • Stocks
    100%

The portfolio's asset class allocation is overwhelmingly skewed towards stocks, making up 99.77% of the total investment. This heavy reliance on equities reflects a high-risk, high-reward approach. While it may offer substantial growth opportunities, it also exposes the portfolio to significant volatility. The minimal allocation to cash and other asset classes suggests limited liquidity and diversification. To enhance stability and reduce risk, consider incorporating a mix of asset classes, such as fixed income or alternative investments, to create a more balanced and resilient portfolio.

Sectors Info

  • Technology
    38%
  • Financials
    12%
  • Consumer Discretionary
    10%
  • Industrials
    9%
  • Health Care
    9%
  • Telecommunications
    6%
  • Consumer Staples
    4%
  • Energy
    4%
  • Real Estate
    2%
  • Basic Materials
    2%
  • Utilities
    2%

The sector allocation reveals a strong concentration in technology, which comprises 38.26% of the portfolio. This indicates a significant reliance on the tech industry's performance, which can lead to volatility given its cyclical nature. Other sectors like financial services and consumer cyclicals have smaller allocations, providing some diversification. However, the overall sector distribution lacks balance, potentially increasing risk. To improve sector diversification, consider spreading investments across a broader range of industries, which can help mitigate the impact of sector-specific downturns and enhance long-term growth potential.

Regions Info

  • North America
    97%
  • Europe Developed
    1%

Geographically, the portfolio is highly concentrated in North America, with 97.04% of assets allocated to this region. This heavy focus on the U.S. market can lead to regional risk, making the portfolio vulnerable to domestic economic fluctuations. The minimal exposure to other regions like Europe, Asia, and Latin America suggests limited international diversification. To reduce geographic risk and tap into global growth opportunities, consider increasing exposure to international markets, which can provide a hedge against U.S.-specific economic downturns and enhance overall portfolio resilience.

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 optimization chart suggests that there is room for improvement in terms of risk and return balance. By moving along the efficient frontier, investors can achieve a more optimized portfolio that aligns with their risk tolerance. For those seeking higher returns, consider increasing exposure to growth-oriented assets while maintaining diversification. Conversely, for a more conservative approach, allocate more to defensive assets like bonds. Before optimizing, focus on enhancing diversification to reduce risk. This can create a more resilient portfolio capable of weathering various market conditions.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.50%
  • iShares Core S&P Mid-Cap ETF 1.20%
  • iShares Core S&P 500 ETF 1.20%
  • Microsoft Corporation 0.50%
  • Schwab U.S. Dividend Equity ETF 3.30%
  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • Vanguard Total International Stock Index Fund ETF Shares 3.00%
  • Weighted yield (per year) 1.13%

The portfolio's dividend yield stands at a modest 1.13%, with contributions from various ETFs and individual stocks. The Schwab U.S. Dividend Equity ETF offers the highest yield at 3.3%, providing some income potential. However, the overall yield is relatively low, indicating a primary focus on capital appreciation rather than income generation. For investors seeking regular income, consider increasing exposure to higher-yielding assets or dividend-focused funds. This can enhance cash flow and provide a buffer during market volatility, contributing to a more balanced investment strategy.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • iShares Core S&P Mid-Cap ETF 0.05%
  • iShares Core S&P 500 ETF 0.03%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.04%

The portfolio's total expense ratio (TER) is quite low at 0.04%, indicating cost-efficient investment management. Most ETFs in the portfolio have minimal fees, with the iShares Core S&P 500 ETF being the most cost-effective at 0.03%. This low-cost structure is advantageous for long-term growth as it minimizes the drag on returns. However, the Avantis® U.S. Small Cap Value ETF has a higher expense ratio of 0.25%, which could impact performance. To maintain cost efficiency, regularly review expense ratios and consider reallocating to lower-cost alternatives if necessary.

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