A growth-focused portfolio with high concentration in U.S. large-cap equities

Report created on Jan 25, 2025

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

The portfolio is heavily weighted toward U.S. large-cap equities, with the Vanguard S&P 500 ETF and Vanguard S&P 500 Growth Index Fund ETF Shares comprising over 80% of the allocation. Such a concentration can lead to high exposure to market trends affecting large-cap stocks. While this aligns with growth objectives, it may limit diversification. Consider diversifying into other asset classes or regions to balance potential risks and returns. This heavy concentration in a single asset class can amplify market movements, both positive and negative.

Growth Info

Historically, the portfolio has delivered a strong Compound Annual Growth Rate (CAGR) of 14.59%, showcasing substantial growth potential. However, it also experienced a maximum drawdown of -29.77%, indicating vulnerability during market downturns. While past performance is encouraging, it doesn't guarantee future results. Comparing this performance to relevant benchmarks might provide insights into its relative success. Consider maintaining a balance between growth and stability to mitigate potential risks associated with high drawdowns.

Projection Info

Monte Carlo simulations, which predict potential outcomes based on historical data, suggest a wide range of future returns. With a median projection of 475.9% and a high annualized return of 18.33%, the outlook is optimistic. However, the 5th percentile indicates a potential loss of -28.8%. Simulations highlight the uncertainty of future performance and the importance of maintaining a diversified approach. While projections are promising, they should be viewed as one of many tools for decision-making, not definitive forecasts.

Asset classes Info

  • Stocks
    99%
  • Bonds
    1%

The portfolio is overwhelmingly concentrated in stocks, with a 99% allocation, and a mere 1% in bonds. This heavy equity exposure aligns with a high-risk, high-reward strategy typical of growth-oriented portfolios. However, such concentration can increase vulnerability to market volatility. Diversifying into bonds or other asset classes can provide a buffer against equity market downturns, offering more stability. Consider adjusting the asset class balance to align with long-term risk tolerance and financial goals.

Sectors Info

  • Technology
    37%
  • Financials
    14%
  • Consumer Discretionary
    12%
  • Telecommunications
    11%
  • Health Care
    8%
  • Industrials
    7%
  • Consumer Staples
    4%
  • Energy
    2%
  • Utilities
    2%
  • Real Estate
    2%
  • Basic Materials
    1%

Technology dominates the sector allocation at 37%, followed by financial services and consumer cyclicals. This tech-heavy focus can lead to increased volatility, especially during periods of interest rate hikes or regulatory changes. While technology has been a strong performer, diversifying across more sectors can reduce sector-specific risks. Aligning sector allocation with economic cycles and trends can enhance portfolio resilience. Consider evaluating sector exposure to ensure alignment with broader economic expectations.

Regions Info

  • North America
    98%
  • Europe Developed
    1%

The portfolio is primarily concentrated in North America, with 98% exposure, potentially limiting global diversification. While the U.S. market has historically been strong, other regions can offer growth opportunities and diversification benefits. Expanding geographic exposure can mitigate risks associated with regional market downturns. Consider adding investments from Europe, Asia, or emerging markets to capture global growth trends and enhance diversification. This approach can help balance potential regional economic fluctuations.

Market capitalization Info

  • Mega-cap
    55%
  • Large-cap
    28%
  • Mid-cap
    14%
  • Small-cap
    1%

The portfolio is heavily weighted toward mega-cap stocks, comprising 55% of the allocation, with big and medium caps making up the rest. Such concentration in larger companies might limit exposure to the growth potential found in smaller companies. While mega-caps offer stability, diversifying across market capitalizations can enhance growth prospects and reduce risk. Consider balancing the portfolio with small and mid-cap stocks to capture a broader range of market opportunities and growth potential.

Redundant positions Info

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

The portfolio includes highly correlated assets, particularly among the S&P 500 and total market ETFs. High correlation means these assets tend to move in tandem, which can limit diversification benefits. During market downturns, such portfolios might not provide the desired risk mitigation. Consider reducing overlap by diversifying into less correlated assets, which can enhance the portfolio's resilience and improve long-term risk-adjusted returns. This strategy can help balance the risk and return profile more effectively.

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 could benefit from optimization using the Efficient Frontier, which aims to achieve the best possible risk-return ratio. By reallocating current assets, the portfolio can potentially enhance returns without increasing risk. However, optimization should consider diversification and other goals beyond risk-return ratios. Focus on reducing highly correlated assets and exploring additional asset classes or regions. This strategy can align the portfolio more closely with its growth objectives while managing risk effectively.

Dividends Info

  • Apple Inc 0.40%
  • Alphabet Inc Class A 0.30%
  • Meta Platforms Inc. 0.30%
  • Microsoft Corporation 0.70%
  • Schwab U.S. Small-Cap ETF 2.10%
  • Schwab U.S. Broad Market ETF 0.80%
  • Schwab International Equity ETF 1.90%
  • Schwab U.S. Large-Cap ETF 2.50%
  • Schwab U.S. Aggregate Bond ETF 5.60%
  • Vanguard Financials Index Fund ETF Shares 1.10%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard S&P 500 Growth Index Fund ETF Shares 0.30%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.20%
  • Weighted yield (per year) 0.85%

With a total yield of 0.85%, the portfolio's dividend income is relatively low, reflecting its growth orientation. While dividends aren't a primary focus for growth portfolios, they can provide a steady income stream and enhance total returns. Increasing exposure to higher-yielding assets might balance growth with income, offering more stability. Consider evaluating dividend-paying stocks or funds to boost yield without compromising growth objectives. This approach can add a layer of income diversification.

Ongoing product costs Info

  • Schwab U.S. Small-Cap ETF 0.04%
  • Schwab U.S. Broad Market ETF 0.03%
  • Schwab International Equity ETF 0.06%
  • Schwab U.S. Large-Cap ETF 0.03%
  • Schwab U.S. Aggregate Bond ETF 0.03%
  • Vanguard Financials Index Fund ETF Shares 0.10%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard S&P 500 Growth Index Fund ETF Shares 0.10%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Weighted costs total (per year) 0.05%

The portfolio's total expense ratio (TER) is impressively low at 0.05%, supporting better long-term performance by minimizing costs. Low expenses are crucial for maximizing net returns, especially in a growth-focused portfolio. Maintaining this cost efficiency is advantageous, but it's also important to consider the potential trade-offs between cost and diversification. Continue to monitor expense ratios to ensure they remain competitive, while also exploring cost-effective ways to enhance diversification and risk management.

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