A growth-focused portfolio with high concentration in large-cap US equities

Risk profile

  • Secure
    Speculative

The risk profile, derived from past market volatility, reflects the level of risk the portfolio is exposed to. This assessment helps align your investments with your financial goals and comfort with market fluctuations.

Diversification profile

  • Focused
    Diversified

The diversification assessment evaluates the spread of investments across asset classes, regions, and sectors. This ensures a balanced mix, reducing risk and maximizing returns by not concentrating in any single area.

What type of investor this portfolio is suitable for

Growth Investors

This portfolio suits an investor with a high risk tolerance seeking aggressive growth and capital appreciation. It is ideal for someone with a long-term investment horizon who can withstand market volatility and potential drawdowns. The focus on large-cap US equities, particularly in the tech sector, aligns with investors looking to capitalize on growth trends. However, the lack of diversification means it may not be suitable for those seeking stability or income generation.

Positions

  • Vanguard S&P 500 ETF
    VOO - US9229083632
    67.00%
  • Vanguard Growth Index Fund ETF Shares
    VUG - US9229087369
    30.00%
  • NVIDIA Corporation
    NVDA - US67066G1040
    3.00%

This portfolio is heavily weighted towards two ETFs: Vanguard S&P 500 ETF at 67% and Vanguard Growth Index Fund ETF Shares at 30%, with a small 3% allocation to NVIDIA Corporation. This composition indicates a strong focus on US large-cap equities, particularly growth stocks. Such a concentration can lead to significant exposure to market movements within this segment. While this focus can be beneficial during periods of market growth, it also means the portfolio is less diversified across different asset classes, which can increase volatility during downturns.

Growth Info

Historically, this portfolio has shown strong performance with a Compound Annual Growth Rate (CAGR) of 14.52%. This impressive growth suggests the portfolio has benefited from the robust performance of US equities, particularly in the technology sector. However, the maximum drawdown of -43.11% highlights the potential for significant losses during market downturns. This serves as a reminder that while past performance has been strong, it does not guarantee future results and underscores the importance of considering risk management strategies.

Projection Info

Monte Carlo simulations, which use historical data to predict future outcomes, indicate a wide range of potential returns. The 50th percentile projects a 3,513.4% return, while the 5th percentile is much lower at 325.0%. These projections highlight the uncertainty and potential variability in future performance. While the annualized return of 36.47% across simulations is promising, it's important to remember that these are based on past data and actual future performance could differ.

Asset classes Info

  • Stocks
    100%
  • Cash
    0%

With 100% of the portfolio in stocks, there is no exposure to other asset classes like bonds or real estate, which could provide diversification benefits. This lack of diversification may increase risk, as the portfolio is entirely reliant on equity market performance. Diversifying across different asset classes can help mitigate risk and provide more stable returns over time. Considering adding other asset classes could enhance the portfolio's resilience to market fluctuations.

Sectors Info

  • Technology
    39%
  • Consumer Discretionary
    12%
  • Financials
    11%
  • Telecommunications
    11%
  • Health Care
    9%
  • Industrials
    6%
  • Consumer Staples
    4%
  • Energy
    2%
  • Real Estate
    2%
  • Utilities
    2%
  • Basic Materials
    2%

The portfolio is heavily weighted towards technology at 39%, followed by consumer cyclicals and financial services. This sector concentration suggests a reliance on the performance of these industries, particularly tech, which can be more volatile. While tech has driven significant growth recently, it can also experience sharp declines, especially during interest rate hikes or regulatory changes. Balancing sector exposure could help reduce risk and improve stability.

Regions Info

  • North America
    100%
  • Europe Developed
    0%
  • Asia Developed
    0%

With 100% exposure to North America, the portfolio lacks geographic diversification. This concentration can limit potential growth opportunities in emerging or developed markets outside the US. Expanding geographic exposure can help reduce risk associated with regional economic downturns and tap into growth in other parts of the world. Consider diversifying into international markets to balance geographic risk and capitalize on global economic trends.

Market capitalization Info

  • Mega-cap
    54%
  • Large-cap
    30%
  • Mid-cap
    15%
  • Small-cap
    0%
  • Micro-cap
    0%

The portfolio is predominantly invested in mega-cap stocks at 54%, followed by big and medium caps. This concentration in large-cap stocks can provide stability and steady growth, as these companies are often well-established with strong market positions. However, it may limit exposure to the potential high growth of smaller-cap companies. Including smaller-cap stocks could enhance diversification and offer higher growth potential, albeit with increased volatility.

Redundant positions Info

  • Vanguard S&P 500 ETF
    Vanguard Growth Index Fund ETF Shares
    High correlation

The Vanguard S&P 500 ETF and Vanguard Growth Index Fund ETF Shares are highly correlated, meaning they tend to move in the same direction. This correlation limits the diversification benefits these assets can provide, as they are likely to react similarly to market changes. Reducing reliance on highly correlated assets and incorporating more diverse investments can improve risk management and potentially enhance returns during market downturns.

Dividends Info

  • Vanguard S&P 500 ETF 1.40%
  • Vanguard Growth Index Fund ETF Shares 0.40%
  • Weighted yield (per year) 1.06%

The portfolio's total dividend yield is 1.06%, with the Vanguard S&P 500 ETF contributing the most. While dividends can provide a steady income stream, this yield is relatively low, reflecting the growth focus of the portfolio. For investors seeking income, increasing exposure to higher-yielding assets could be beneficial. However, growth-focused investors may prioritize capital appreciation over dividend income, aligning with the current portfolio strategy.

Ongoing product costs Info

  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Growth Index Fund ETF Shares 0.04%
  • Weighted costs total (per year) 0.03%

The total expense ratio (TER) of the portfolio is impressively low at 0.03%, which is beneficial for long-term performance. Lower costs mean more of the portfolio's returns are retained, enhancing compounding over time. This cost efficiency is a positive aspect of the portfolio, aligning with best practices for minimizing expenses. Maintaining low costs should remain a priority to support better net returns over the long term.

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.

The portfolio could potentially be optimized using the Efficient Frontier, which seeks the best possible risk-return ratio. However, the current high correlation between assets suggests limited diversification benefits. Before pursuing optimization, consider reducing the overlap of highly correlated assets to enhance diversification. This approach can help achieve a more balanced risk-return profile, aligning with the principles of the Efficient Frontier.

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