A growth-focused portfolio with high exposure to large-cap US equities and limited geographic diversity

Report created on Jan 10, 2025

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

This portfolio is heavily weighted towards large-cap US equities, with 50% in the Vanguard S&P 500 ETF and 30% in the Schwab U.S. Large-Cap Growth ETF. The remaining 20% is in the Avantis® U.S. Small Cap Value ETF. This composition leans heavily towards growth, reflecting a preference for capital appreciation over income. Compared to a typical benchmark, which might include a mix of equities and bonds, this portfolio is more aggressive. To enhance diversification, consider adding different asset classes, such as bonds or international equities, to mitigate potential volatility.

Growth Info

Historically, this portfolio has performed well, with a Compound Annual Growth Rate (CAGR) of 18.76%. This impressive growth is due to the strong performance of large-cap US stocks in recent years. However, the portfolio also experienced a significant maximum drawdown of -35.78%, indicating vulnerability during market downturns. While past performance is not indicative of future results, understanding these trends can help manage expectations. To reduce potential drawdowns, consider incorporating more defensive assets or increasing cash reserves.

Projection Info

Using Monte Carlo simulations, which predict future outcomes based on historical data, this portfolio shows a promising outlook. With 1,000 simulations, the median outcome projects a portfolio value increase of 968.34%. However, simulations are not guarantees and rely on assumptions that may not hold in the future. The broad range of potential outcomes highlights the inherent uncertainty in investing. To prepare for various scenarios, consider stress-testing the portfolio against different economic conditions.

Asset classes Info

  • Stocks
    100%

The portfolio is almost entirely composed of stocks, at 99.89%, with a negligible cash position. This heavy stock allocation suggests a high-risk, high-reward strategy typical of growth-focused portfolios. While stocks offer significant growth potential, they also come with increased volatility. Diversifying into other asset classes, such as bonds or real estate, could provide more stability and reduce risk. Balancing the asset classes can help achieve a more consistent return profile over time.

Sectors Info

  • Technology
    32%
  • Financials
    14%
  • Consumer Discretionary
    12%
  • Health Care
    9%
  • Telecommunications
    9%
  • Industrials
    8%
  • Energy
    5%
  • Consumer Staples
    4%
  • Basic Materials
    3%
  • Utilities
    2%
  • Real Estate
    1%

Sector allocation shows a strong concentration in technology at 32.13%, followed by financial services and consumer cyclicals. This concentration can lead to higher volatility, especially if technology faces sector-specific challenges like regulatory changes. While the sector composition aligns with growth trends, it may benefit from greater balance. Consider increasing exposure to underrepresented sectors like utilities or real estate, which can provide stability and income during market fluctuations.

Regions Info

  • North America
    99%

The portfolio's geographic exposure is overwhelmingly North American at 99.25%, with minimal investments in other regions. This lack of geographic diversification increases vulnerability to regional economic downturns. While US markets have historically performed well, global diversification can reduce risk and capture growth opportunities elsewhere. Consider adding international equities or funds to achieve a more balanced geographic distribution and mitigate regional risks.

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 can potentially be optimized using the Efficient Frontier, which identifies the best possible risk-return balance. By adjusting the allocation between existing assets, it's possible to achieve a more favorable risk-return ratio. This optimization does not necessarily mean adding new assets but rather reallocating to maximize efficiency. Regularly reviewing and adjusting the portfolio can ensure it remains aligned with risk tolerance and investment goals.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.60%
  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • Vanguard S&P 500 ETF 1.20%
  • Weighted yield (per year) 1.04%

With a total dividend yield of 1.04%, this portfolio offers limited income potential. The focus on growth-oriented ETFs results in lower yields compared to income-focused investments. While dividends can provide a steady income stream and help cushion against market volatility, they are not the primary goal here. If income is a priority, consider increasing exposure to high-dividend stocks or dividend-focused funds to enhance yield.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.08%

The portfolio's total expense ratio (TER) of 0.08% is impressively low, indicating cost efficiency. Low costs are crucial for maximizing net returns over the long term, as fees can significantly erode gains. This cost structure aligns well with best practices for cost management. Continue monitoring for any changes in fees and consider replacing higher-cost funds with lower-cost alternatives to maintain this advantage.

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