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A growth-focused portfolio with high U.S. exposure and limited diversification

Report created on Jan 5, 2025

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 concentrated in U.S. large-cap ETFs, with nearly half in Schwab U.S. Large-Cap Growth ETF. This composition leans towards growth-oriented stocks, with significant overlap among the three ETFs. While this setup may capture substantial growth, it lacks diversification across different asset classes and sectors, which could increase risk during market downturns. Considering a more varied asset allocation could help mitigate risk and improve long-term stability.

Growth Info

Historically, the portfolio has performed well, with a Compound Annual Growth Rate (CAGR) of 16.66%. This indicates strong growth potential, especially given the focus on large-cap U.S. stocks. However, the maximum drawdown of -33.32% highlights vulnerability during market corrections. Comparing this performance to a broad market index, the portfolio has outpaced average returns, but the high volatility suggests the need for a balanced risk management strategy.

Projection Info

Forward projections using Monte Carlo simulations show a wide range of potential outcomes, with a median return of 690.11%. This method uses historical data to model future scenarios, but it's important to remember that past performance does not guarantee future results. While the projections are optimistic, they underscore the need for ongoing portfolio assessment to ensure alignment with personal risk tolerance and investment goals.

Asset classes Info

  • Stocks
    100%

The portfolio is almost entirely invested in stocks, with a negligible amount in cash. This allocation is typical for a growth-oriented strategy but lacks the diversification benefits that other asset classes, like bonds or real estate, could offer. Diversifying into different asset classes could reduce volatility and provide a buffer against market fluctuations, potentially leading to more stable returns over time.

Sectors Info

  • Technology
    40%
  • Consumer Discretionary
    12%
  • Telecommunications
    11%
  • Health Care
    10%
  • Financials
    10%
  • Industrials
    6%
  • Consumer Staples
    4%
  • Energy
    2%
  • Basic Materials
    2%
  • Utilities
    2%
  • Real Estate
    1%

The portfolio is heavily weighted towards the technology sector, comprising over 40% of the total allocation. This concentration aligns with recent market trends favoring tech stocks, but it also exposes the portfolio to sector-specific risks, such as regulatory changes or tech market corrections. Balancing sector exposure by increasing investment in underrepresented areas like utilities or real estate could enhance diversification and reduce risk.

Regions Info

  • North America
    100%

Geographic exposure is predominantly in North America, with minimal allocation to other regions. This concentration offers limited protection against regional economic downturns and misses potential growth opportunities in emerging markets. Expanding geographic diversification could provide exposure to different economic cycles and growth drivers, contributing to a more resilient portfolio.

Redundant positions Info

  • Schwab U.S. Large-Cap Growth ETF
    Vanguard S&P 500 ETF
    Schwab U.S. Large-Cap ETF
    High correlation

The assets within the portfolio are highly correlated, meaning they tend to move in the same direction. This lack of diversification can increase risk, especially during market downturns when correlated assets may all decline simultaneously. Reducing overlap and adding assets with lower correlation could enhance diversification benefits, leading to a more balanced risk-return profile.

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.

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The portfolio could benefit from optimization using the Efficient Frontier, which aims to achieve the best possible risk-return ratio. By adjusting the allocation among existing assets, it's possible to enhance efficiency. However, this approach should be balanced with diversification goals to ensure a well-rounded investment strategy.

Dividends Info

  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • Schwab U.S. Large-Cap ETF 1.50%
  • Vanguard S&P 500 ETF 1.20%
  • Weighted yield (per year) 0.90%

The portfolio's dividend yield is relatively low at 0.9%, reflecting its growth-oriented nature. Dividends can provide a steady income stream and help cushion against market volatility. If income is a priority, consider reallocating some investments towards higher-yielding assets without compromising growth potential.

Ongoing product costs Info

  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • Schwab U.S. Large-Cap ETF 0.03%
  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.03%

The portfolio's costs are impressively low, with a Total Expense Ratio (TER) of 0.03%. This cost efficiency supports better long-term performance by minimizing the drag on returns. Maintaining low costs while exploring diversification opportunities can enhance overall portfolio efficiency and help achieve investment goals.

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