A concentrated US-focused portfolio with strong historical returns and moderate risk

Report created on Jan 26, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

The portfolio is primarily composed of three ETFs, with a heavy focus on U.S. equities. The Invesco NASDAQ 100 ETF and Vanguard S&P 500 ETF each hold 40% of the portfolio, while the Schwab U.S. Dividend Equity ETF accounts for the remaining 20%. This composition results in a low diversification score, as it heavily leans towards large-cap U.S. stocks. While this concentration can lead to strong performance in bullish markets, it may increase vulnerability during downturns. Consider diversifying by incorporating international or alternative asset classes to balance risk.

Growth Info

The portfolio has demonstrated an impressive historical performance with a Compound Annual Growth Rate (CAGR) of 15.70%. However, it has also experienced a significant maximum drawdown of -26.33%, indicating vulnerability to market downturns. This performance highlights the potential for high returns but also underscores the importance of risk management. The portfolio's returns are concentrated in a small number of trading days, which is typical in equity-heavy portfolios. It's important to remember that past performance is not indicative of future results.

Projection Info

The Monte Carlo simulation, which uses historical data to project future outcomes, suggests a wide range of potential returns for this portfolio. With 1,000 simulations, the median (50th percentile) outcome projects a significant growth of 612.7%, while the more conservative 5th percentile still shows a positive return of 125.1%. While these projections are encouraging, it's crucial to understand that they are based on past data and assumptions, which may not accurately predict future performance. Diversifying the portfolio could help stabilize returns across different market conditions.

Asset classes Info

  • Stocks
    100%

The portfolio's allocation is entirely in stocks, with no exposure to bonds, cash, or alternative investments. This lack of diversification across asset classes can lead to higher volatility, particularly in periods of market stress. While the current allocation might yield higher returns in a bull market, introducing other asset classes could help mitigate risks and provide more stable returns. Consider adding fixed income or real assets to diversify and reduce overall portfolio risk.

Sectors Info

  • Technology
    36%
  • Consumer Discretionary
    12%
  • Telecommunications
    10%
  • Health Care
    10%
  • Financials
    9%
  • Consumer Staples
    7%
  • Industrials
    7%
  • Energy
    4%
  • Utilities
    2%
  • Basic Materials
    2%
  • Real Estate
    1%

The portfolio is heavily weighted towards the technology sector, which comprises 36% of the holdings. This concentration aligns with the composition of the NASDAQ 100 and S&P 500 indexes but can lead to increased volatility, especially during periods of regulatory scrutiny or interest rate changes. While technology has been a strong performer, balancing exposure across other sectors like healthcare or consumer staples could provide more stability and reduce the impact of sector-specific downturns.

Regions Info

  • North America
    99%
  • Europe Developed
    1%

Geographically, the portfolio is overwhelmingly focused on North America, with 99% of its holdings in this region. This heavy concentration limits exposure to international markets, which could reduce the benefits of global diversification. While the U.S. market has been strong, international diversification can help hedge against regional economic downturns and provide opportunities in emerging markets. Consider adding global or international ETFs to achieve a more balanced geographic allocation.

Market capitalization Info

  • Large-cap
    41%
  • Mega-cap
    40%
  • Mid-cap
    17%
  • Small-cap
    1%

The portfolio is predominantly invested in large-cap and mega-cap stocks, with 81% of the holdings in these categories. This focus can provide stability and consistent returns, as large companies tend to be more established. However, it may also limit exposure to the potentially higher growth of mid-cap and small-cap stocks. Introducing more mid-cap and small-cap equities could enhance growth potential and improve overall diversification, balancing the risk-return profile.

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's current allocation could be optimized using the Efficient Frontier, a concept that seeks the best possible risk-return ratio. By adjusting the weightings within the existing assets, the portfolio could potentially achieve a more favorable balance between risk and return. However, this approach does not guarantee diversification or alignment with specific investment goals. Consider conducting a risk-return analysis to explore potential reallocations that align with your objectives.

Dividends Info

  • Invesco NASDAQ 100 ETF 0.60%
  • Schwab U.S. Dividend Equity ETF 3.50%
  • Vanguard S&P 500 ETF 1.20%
  • Weighted yield (per year) 1.42%

The portfolio has a modest dividend yield of 1.42%, with the Schwab U.S. Dividend Equity ETF contributing the highest yield at 3.50%. Dividends can provide a steady income stream and contribute to total returns, particularly in volatile markets. However, the focus on growth-oriented ETFs like the NASDAQ 100 and S&P 500 limits the overall yield. If generating income is a priority, consider increasing exposure to dividend-focused investments or incorporating high-yield bonds.

Ongoing product costs Info

  • Invesco NASDAQ 100 ETF 0.15%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.08%

The portfolio benefits from low costs, with a total expense ratio (TER) of 0.08%. This efficiency is achieved through the use of ETFs, which typically have lower fees compared to actively managed funds. Keeping costs low is crucial for long-term performance, as high fees can erode returns over time. The current cost structure is well-optimized, supporting the portfolio's growth objectives. Continue to monitor fees and consider cost-effective options when making adjustments.

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