Optimizing a growth-focused portfolio with high exposure to US equities and low diversification

Report created on Aug 5, 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 concentrated in US equities, with a 100% allocation towards stock ETFs, showcasing a clear growth orientation. The inclusion of three S&P 500 ETFs and a growth index fund indicates a strong bias towards large-cap US stocks. Such concentration, while beneficial during bullish market phases, poses significant risk during downturns due to the lack of asset class and geographic diversification. The portfolio's structure suggests an attempt to blend growth with income, as evidenced by the allocation to a dividend-focused ETF.

Growth Info

Historically, this portfolio has delivered a Compound Annual Growth Rate (CAGR) of 14.82%, with a maximum drawdown of -32.64%. These figures highlight the portfolio's high-growth yet volatile nature. The days contributing 90% of returns being limited to 32.0 indicates that the portfolio's performance is heavily reliant on a few strong market days. While past success is notable, it's important to remember that such performance may not predict future results, especially considering the concentrated risk.

Projection Info

Monte Carlo simulations project a wide range of outcomes, with the 50th percentile suggesting a potential 526.6% increase. However, the significant spread between the 5th and 67th percentiles (93.2% to 801.4%) underscores the high level of uncertainty and risk inherent in this portfolio. These projections, while useful for understanding potential volatility and reward, should be viewed with caution as they are based on historical data and cannot guarantee future performance.

Asset classes Info

  • Stocks
    100%

The portfolio's allocation is entirely to stocks, excluding other asset classes like bonds or real estate, which could provide income and reduce volatility. This singular focus enhances growth potential but also increases susceptibility to market swings, particularly in the US stock market. Diversifying across asset classes could help mitigate risk without necessarily compromising long-term growth objectives.

Sectors Info

  • Technology
    33%
  • Consumer Discretionary
    12%
  • Health Care
    10%
  • Telecommunications
    9%
  • Financials
    9%
  • Consumer Staples
    9%
  • Energy
    8%
  • Industrials
    7%
  • Basic Materials
    1%
  • Real Estate
    1%
  • Utilities
    1%

The sectoral allocation reveals a heavy tilt towards technology, which comprises a third of the portfolio. This concentration is both a strength and a vulnerability, reflecting the sector's high growth potential alongside its sensitivity to market corrections and interest rate changes. The under-representation of traditionally defensive sectors like utilities and real estate further accentuates the portfolio's aggressive stance.

Regions Info

  • North America
    100%

Geographic allocation is exclusively North American, omitting exposure to developed markets in Europe and high-growth potential regions like Asia and Latin America. This geographic concentration limits diversification benefits and exposure to global growth trends, potentially missing out on opportunities in faster-growing economies.

Market capitalization Info

  • Large-cap
    39%
  • Mega-cap
    38%
  • Mid-cap
    21%
  • Small-cap
    2%

The market capitalization breakdown shows a preference for big and mega-cap stocks, which are typically more stable than their smaller counterparts but may offer lower growth potential. The minimal exposure to small and micro-cap stocks misses the diversification and higher growth opportunities these segments can offer, albeit with increased risk.

Redundant positions Info

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

The portfolio's significant overlap among the S&P 500 ETFs and the growth index fund creates a redundancy that does not contribute to diversification. High correlation between these assets means that they are likely to move in tandem, reducing the effectiveness of diversification as a risk management tool. Streamlining the portfolio to eliminate overlapping holdings could enhance efficiency without sacrificing performance.

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.

Optimizing this portfolio involves addressing its high correlation among holdings and lack of diversification. By reallocating funds from overlapping S&P 500 ETFs into different asset classes or geographic regions, the portfolio could achieve a more balanced risk-return profile. Utilizing the Efficient Frontier concept could help in identifying an allocation that offers the best possible return for a given level of risk, although it's important to remember that this model is based on historical data and assumptions.

Dividends Info

  • iShares Core S&P 500 ETF 1.30%
  • Schwab U.S. Dividend Equity ETF 3.90%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Growth Index Fund ETF Shares 0.40%
  • Weighted yield (per year) 1.84%

Dividend yields vary across the ETFs, with the portfolio's total yield standing at 1.84%. This yield contributes to the portfolio's total return, offering a cushion during market downturns. However, the focus on growth-oriented assets means dividends play a secondary role in the portfolio's strategy. Balancing growth with income-generating assets could provide a more consistent income stream and reduce volatility.

Ongoing product costs Info

  • iShares Core S&P 500 ETF 0.03%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Growth Index Fund ETF Shares 0.04%
  • Weighted costs total (per year) 0.04%

The portfolio benefits from low total expense ratios (TERs), averaging 0.04%, which is favorable for long-term growth as it minimizes the drag on returns caused by fees. Keeping costs low is crucial for maximizing investment returns, especially in a growth-focused strategy where compound interest plays a significant role over time.

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