A growth-focused portfolio with low diversification and high U.S. market exposure

Report created on Mar 1, 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 concentrated in three ETFs, with the SPDR S&P 500 ETF Trust making up 42.11%. This composition suggests a strong focus on U.S. large-cap equities. Compared to a typical diversified portfolio, this setup lacks exposure to international markets and other asset classes, such as bonds or commodities. While the focus on large-cap stocks can offer stability and growth, introducing more varied asset types could enhance diversification and potentially reduce risk. Consider adding different asset classes to balance the portfolio's risk profile.

Growth Info

The portfolio has shown impressive historical performance, with a Compound Annual Growth Rate (CAGR) of 18.72%. This suggests strong returns over time, outperforming many common benchmarks. However, it's important to note the significant max drawdown of -33.06%, indicating vulnerability during market downturns. While past performance is not a guarantee of future results, understanding these trends helps set realistic expectations. To mitigate potential losses, consider strategies that include defensive assets or sectors that traditionally perform well in downturns.

Projection Info

Forward projections using Monte Carlo simulations show a wide range of potential outcomes, with a median return of 1,067%. These simulations use historical data to estimate future performance, but it's important to remember that they can't predict exact outcomes. The optimistic projections highlight growth potential, yet the presence of highly correlated assets could limit diversification benefits. To improve future returns, consider diversifying with assets that have lower correlations, which can help cushion against market volatility.

Asset classes Info

  • Stocks
    100%

The portfolio is entirely composed of stocks, with no allocation to bonds, cash, or alternative investments. This 100% stock allocation aligns with a growth-focused strategy but lacks the diversification benefits that other asset classes can provide. Diversification across asset classes can help manage risk and smooth returns over time. Introducing bonds or cash equivalents could reduce volatility and provide a buffer during market downturns, offering a more balanced risk-return profile.

Sectors Info

  • Technology
    29%
  • Financials
    17%
  • Consumer Discretionary
    11%
  • Health Care
    10%
  • Telecommunications
    9%
  • Industrials
    8%
  • Consumer Staples
    6%
  • Energy
    3%
  • Utilities
    2%
  • Real Estate
    2%
  • Basic Materials
    1%

Sector allocation shows a heavy tilt towards technology at 29%, followed by financial services at 17%. This concentration in tech could lead to higher volatility, especially during periods of interest rate hikes or regulatory changes. While technology has been a strong performer, balancing sector exposure can reduce sector-specific risks. Consider increasing exposure to sectors like consumer staples or healthcare, which may offer more stability during economic downturns, to achieve a more balanced portfolio.

Regions Info

  • North America
    99%
  • Europe Developed
    1%

With 99% of assets in North America, the portfolio is highly concentrated geographically. This heavy U.S. exposure can limit diversification and increase vulnerability to regional economic downturns. Global diversification can help mitigate this risk by spreading investments across different economic environments. Consider adding international equities, particularly from emerging markets, to enhance geographic balance and potentially improve long-term returns by capturing growth opportunities outside the U.S.

Market capitalization Info

  • Mega-cap
    49%
  • Large-cap
    33%
  • Mid-cap
    16%
  • Small-cap
    2%

The portfolio is skewed towards mega-cap stocks, which comprise 49% of the allocation. While mega-cap stocks can provide stability and less volatility, the lack of exposure to small and micro-cap stocks may miss out on high-growth opportunities. Diversifying market capitalization can enhance growth potential and provide a broader exposure to the market. Introducing more small-cap stocks can increase growth potential, albeit with higher risk, offering a more comprehensive market exposure.

Redundant positions Info

  • SPDR S&P 500 ETF Trust
    SPDR® Portfolio S&P 1500 Composite Stock Market ETF
    High correlation

The portfolio's assets are highly correlated, particularly between the SPDR S&P 500 ETF Trust and the SPDR Portfolio S&P 1500 Composite Stock Market ETF. High correlation means these assets tend to move in the same direction, limiting diversification benefits. During market downturns, this can lead to amplified losses. To reduce risk, consider adding assets with lower correlations, such as international equities or bonds, to achieve a more diversified and resilient portfolio.

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 identifies the best possible risk-return ratio based on current assets. However, high asset correlation limits diversification benefits, potentially reducing optimization effectiveness. To enhance efficiency, consider diversifying with assets that have lower correlations. This approach can help achieve a more optimal risk-return balance, ensuring the portfolio is not overly reliant on a single economic environment or market condition.

Dividends Info

  • Invesco S&P 500® Momentum ETF 0.50%
  • SPDR® Portfolio S&P 1500 Composite Stock Market ETF 1.30%
  • SPDR S&P 500 ETF Trust 1.20%
  • Weighted yield (per year) 1.01%

The portfolio's dividend yield stands at 1.01%, with contributions from all three ETFs. While dividend income can provide a steady cash flow, the overall yield is modest. For growth-focused investors, reinvesting dividends can enhance compounding returns over time. However, for those seeking income, exploring higher-yielding assets could be beneficial. Balancing growth and income needs is key, and adjusting the portfolio to include higher dividend-paying stocks or funds may be worthwhile for those prioritizing income.

Ongoing product costs Info

  • Invesco S&P 500® Momentum ETF 0.13%
  • SPDR® Portfolio S&P 1500 Composite Stock Market ETF 0.03%
  • SPDR S&P 500 ETF Trust 0.10%
  • Weighted costs total (per year) 0.09%

The portfolio's total expense ratio (TER) is low at 0.09%, which is favorable for long-term returns. Low costs mean more of your investment is working for you, enhancing compounding effects over time. This cost efficiency aligns well with best practices for maximizing investment returns. Maintaining a focus on cost-effective investment vehicles can continue to support strong performance. Regularly reviewing and comparing costs with other options ensures the portfolio remains competitively priced.

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