A growth-focused portfolio with strong US equity concentration and minimal international exposure

Report created on Dec 6, 2024

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 predominantly composed of US equity ETFs, with a significant allocation towards the Vanguard S&P 500 ETF and Vanguard Total Stock Market Index Fund ETF Shares. These two ETFs account for over half of the portfolio, emphasizing a focus on broad market exposure. The remaining investments are spread across other ETFs, including those targeting growth, dividends, and international stocks. This composition suggests a strategy aimed at capturing market growth while maintaining some diversification. However, the heavy reliance on US equities may limit the potential for benefiting from global market opportunities. Diversifying further into international markets or different asset classes could enhance the portfolio's resilience against US market-specific risks.

Growth Info

Historically, the portfolio has demonstrated strong performance with a compound annual growth rate (CAGR) of 14.73%. This impressive growth rate reflects the robust performance of US equities, particularly in technology and large-cap stocks. However, the portfolio also experienced a maximum drawdown of -32.51%, indicating significant volatility during market downturns. This highlights the importance of understanding the risks associated with high-growth portfolios. While past performance can provide insights, it's not a guarantee of future results. Investors should be prepared for potential fluctuations and consider strategies to mitigate risk, such as diversifying further or incorporating defensive assets.

Projection Info

Forward projections using Monte Carlo simulations suggest a range of potential outcomes for this portfolio. The simulations, based on historical data, estimate a median return of 487.43% over the modeled period. Monte Carlo analysis provides a probabilistic view of future performance, helping investors understand potential risks and rewards. It's crucial to note that these projections are based on past market behavior and may not account for future market changes or unforeseen events. Investors should use these insights as part of a broader strategy, considering their risk tolerance and long-term goals when making adjustments to their portfolio.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily concentrated in stocks, with an allocation of over 99% in equities. This high concentration in a single asset class suggests a focus on capital appreciation, typical of growth-oriented strategies. While equities offer the potential for significant returns, they also come with higher volatility compared to other asset classes like bonds or cash. To balance risk, investors might consider incorporating a mix of asset classes, such as fixed income or alternative investments, to provide stability during market downturns. Diversifying across asset classes can help manage risk and improve the risk-return profile of the portfolio.

Sectors Info

  • Technology
    34%
  • Financials
    11%
  • Consumer Discretionary
    11%
  • Health Care
    10%
  • Telecommunications
    10%
  • Industrials
    8%
  • Consumer Staples
    6%
  • Energy
    4%
  • Basic Materials
    2%
  • Utilities
    2%
  • Real Estate
    2%

The portfolio exhibits a notable concentration in the technology sector, representing approximately 34% of the total allocation. This sectoral focus aligns with the growth-oriented nature of the portfolio, as technology stocks have been key drivers of market performance in recent years. However, such concentration can also increase vulnerability to sector-specific risks, such as regulatory changes or market saturation. To mitigate these risks, investors might consider diversifying across a broader range of sectors. This can help reduce the impact of adverse developments in any single sector and enhance the overall stability of the portfolio.

Regions Info

  • North America
    92%
  • Europe Developed
    4%
  • Asia Emerging
    1%
  • Japan
    1%
  • Asia Developed
    1%

Geographically, the portfolio is heavily weighted towards North American markets, with over 91% of assets allocated to this region. This strong domestic focus may limit exposure to growth opportunities in other parts of the world, such as emerging markets or developed economies outside the US. Geographic diversification can help spread risk and capture potential returns from diverse economic environments. Investors may want to consider increasing their allocation to international markets to benefit from global economic growth and reduce reliance on the US market. This approach can enhance the portfolio's ability to weather regional economic fluctuations.

Redundant positions Info

  • Vanguard S&P 500 ETF
    Invesco QQQ Trust
    Vanguard Total Stock Market Index Fund ETF Shares
    Schwab U.S. Large-Cap Growth ETF
    High correlation

The portfolio contains several highly correlated assets, particularly among the US equity ETFs. This correlation suggests that these assets tend to move in the same direction in response to market events, potentially reducing the diversification benefits they provide. High correlation can increase risk during market downturns, as similar assets may decline simultaneously. To improve diversification and manage risk, investors should consider reducing exposure to overlapping assets and incorporating investments with lower correlation. This strategy can help create a more balanced portfolio that is better equipped to handle market volatility and achieve more consistent returns.

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 current portfolio could potentially be optimized using the Efficient Frontier, which involves adjusting the asset allocation to achieve the best possible risk-return ratio. Optimization focuses on maximizing returns for a given level of risk or minimizing risk for a given level of return. By examining the correlation and performance of the current assets, investors can identify opportunities to reallocate resources and improve efficiency. It's important to note that optimization does not necessarily equate to increased diversification but rather seeks to enhance the portfolio's overall risk-adjusted performance. Regularly reviewing and adjusting the portfolio can help maintain alignment with investment goals.

Dividends Info

  • Invesco QQQ Trust 0.60%
  • Schwab U.S. Dividend Equity ETF 2.50%
  • Schwab U.S. Large-Cap Growth ETF 0.30%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.20%
  • Vanguard Total International Stock Index Fund ETF Shares 2.90%
  • Weighted yield (per year) 1.24%

The portfolio's dividend yield stands at 1.24%, with contributions from various ETFs, including the Schwab U.S. Dividend Equity ETF and the Vanguard Total International Stock Index Fund ETF Shares. While dividends provide a steady income stream, the yield is relatively modest, reflecting the growth-oriented nature of the portfolio. Investors seeking higher income might consider increasing their allocation to dividend-focused assets. However, it's essential to balance income generation with growth potential, ensuring that the pursuit of dividends does not compromise the portfolio's overall performance. A diversified approach can help achieve a suitable balance between income and capital appreciation.

Ongoing product costs Info

  • Invesco QQQ Trust 0.20%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • Vanguard S&P 500 ETF 0.03%
  • 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) 0.07%

The portfolio's total expense ratio (TER) is 0.07%, which is relatively low and beneficial for long-term returns. Lower costs mean more of the portfolio's returns are retained by the investor, enhancing the compounding effect over time. While the expense ratios of the individual ETFs are already competitive, investors should remain vigilant about costs and consider opportunities to further reduce them where possible. This might include exploring lower-cost alternatives or negotiating fees with financial advisors. Keeping costs in check is a crucial aspect of optimizing portfolio performance and achieving financial goals.

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