A growth-focused portfolio with strong US exposure and high technology concentration

Report created on Jan 13, 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 evenly split among four ETFs, each holding a 25% share. The allocation is heavily skewed towards equities, with minimal cash holdings. While this structure is straightforward, it lacks diversification, concentrating primarily on US-based large-cap stocks. A more balanced portfolio typically includes a mix of asset classes like bonds and international equities to mitigate risk. To enhance diversification, consider introducing assets from different classes or regions, which can help cushion against market volatility and economic downturns.

Growth Info

Historically, this portfolio has delivered a robust Compound Annual Growth Rate (CAGR) of 16.3%, indicating strong past performance. However, it also experienced a significant maximum drawdown of -32.63%, reflecting its susceptibility to market downturns. Comparing this to benchmark indices, the portfolio's performance is impressive, but the volatility suggests a higher risk level. To manage risk, consider diversifying holdings to include more defensive assets, potentially reducing the impact of future market declines.

Projection Info

Using Monte Carlo simulations, future outcomes project a wide range of potential returns, with a median expectation of 656.69% growth. This method uses historical data to estimate future performance, but remember, it's not a guarantee. The simulations show a high probability of positive returns, yet the range underscores potential volatility. To improve predictability, consider diversifying the portfolio to reduce reliance on any single asset class or market condition, which can stabilize returns over time.

Asset classes Info

  • Stocks
    100%

The portfolio is overwhelmingly invested in stocks, accounting for over 99% of the allocation. This focus on equities aligns with a growth strategy but limits risk mitigation through other asset classes like bonds or real estate. A more diversified asset allocation could provide a buffer against stock market fluctuations, offering a steadier performance during economic uncertainties. Introducing a mix of asset classes can enhance risk-adjusted returns, aligning with long-term growth objectives.

Sectors Info

  • Technology
    48%
  • Financials
    10%
  • Health Care
    9%
  • Consumer Discretionary
    9%
  • Telecommunications
    7%
  • Industrials
    6%
  • Consumer Staples
    5%
  • Energy
    4%
  • Basic Materials
    1%
  • Utilities
    1%
  • Real Estate
    1%

The sector allocation is heavily weighted towards technology at nearly 48%, with financial services and healthcare trailing behind. This concentration can lead to heightened volatility, especially during sector-specific downturns. Aligning closer to benchmark sector weights can reduce risk, as diversified sector exposure often leads to smoother performance across different economic cycles. Consider rebalancing to achieve a more even sector distribution, potentially including underrepresented sectors for broader exposure.

Regions Info

  • North America
    99%

Geographically, the portfolio is almost entirely focused on North America, with negligible exposure to other regions. This lack of international diversification can increase vulnerability to localized economic downturns or policy changes. Including international equities can provide access to growth opportunities in emerging and developed markets outside the US. A more globally diversified portfolio can help mitigate regional risks and capture growth from different economic environments.

Redundant positions Info

  • Schwab U.S. Large-Cap Growth ETF
    Vanguard S&P 500 ETF
    Vanguard Information Technology Index Fund ETF Shares
    High correlation

The portfolio's assets are highly correlated, particularly among the Schwab U.S. Large-Cap Growth ETF, Vanguard S&P 500 ETF, and Vanguard Information Technology Index Fund ETF Shares. High correlation means these assets tend to move in the same direction, reducing diversification benefits. To enhance diversification, consider incorporating assets with lower correlation to existing holdings, which can help smooth portfolio volatility and improve risk-adjusted returns during market fluctuations.

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.

Before optimizing the portfolio using the Efficient Frontier, address the high correlation among assets. By removing overlapping ETFs, you can achieve a more diversified portfolio that better balances risk and return. The Efficient Frontier helps identify the best possible risk-return ratio, but it depends on having a well-diversified asset base. Once correlation issues are resolved, use optimization techniques to fine-tune asset weights, enhancing the portfolio's efficiency.

Dividends Info

  • Schwab U.S. Dividend Equity ETF 3.70%
  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • Vanguard Information Technology Index Fund ETF Shares 0.60%
  • Vanguard S&P 500 ETF 1.30%
  • Weighted yield (per year) 1.50%

The portfolio's dividend yield stands at 1.5%, primarily driven by the Schwab U.S. Dividend Equity ETF. For growth-focused investors, dividends may not be the primary concern, but they can provide a steady income stream and contribute to total returns. If income generation is a priority, consider increasing exposure to high-dividend-paying assets. However, for those focused on capital appreciation, maintaining the current dividend exposure may suffice.

Ongoing product costs Info

  • Schwab U.S. Dividend Equity ETF 0.06%
  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • Vanguard Information Technology Index Fund ETF Shares 0.10%
  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.06%

The portfolio's total expense ratio (TER) is impressively low at 0.06%, which is beneficial for long-term performance as lower costs mean more returns stay in your pocket. This efficient cost structure aligns well with best practices in portfolio management. To maintain or improve cost efficiency, regularly review the expense ratios of your holdings and consider lower-cost alternatives if available. Keeping costs low is a key component of maximizing net returns over time.

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