A growth oriented US tilted equity portfolio with moderate diversification and low fees
Report created on Aug 12, 2024Risk profile
5/7
Diversification profile
3/5
Positions
-
VT Vanguard Total Stock Market Index Fund ETF Shares
VTI - US9229087690 40.00% -
SC Schwab U.S. Dividend Equity ETF
SCHD - US8085247976 20.00% -
SC Schwab U.S. Large-Cap Growth ETF
SCHG - US8085243009 20.00% -
AV Avantis® U.S. Small Cap Value ETF
AVUV - US0250728773 10.00% -
EF iShares MSCI EAFE ETF
EFA - US4642874659 10.00%
The portfolio is concentrated in five ETFs with a heavy US equity focus: 40% broad total market exposure, two 20% allocations to dividend and large-cap growth strategies, plus 10% small‑cap value and 10% developed ex‑US. This structure leans toward US large caps while retaining some small and international exposure. Comparing to a global market‑cap benchmark this is noticeably US tilted and equity‑only. That matters because portfolio behavior will track US equity cycles closely. Recommendation: explicitly decide if the US bias is intentional and if so maintain disciplined rebalancing to preserve target weights as markets move.
Growth
Historically the portfolio shows strong headline performance with a reported CAGR of 16.46% and a maximum drawdown near -34.9%. CAGR, or Compound Annual Growth Rate, measures average annual growth like an average speed on a long trip. The large drawdown highlights volatility despite high returns and the fact that 90% of returns were driven by only 19 days shows event concentration. Recommendation: use periodic rebalancing and a documented plan for drawdowns so that big up and down moves don’t derail goals; simulate scenarios with different starting dates because past runs may not repeat.
Projection
A Monte Carlo simulation models many hypothetical future paths by randomly drawing from historical return patterns to show a range of outcomes. Here the median outcome was roughly a multiple of starting capital while the 5th percentile showed a much lower outcome, indicating tail risk. Simulations are useful for planning but have limits: they assume historical return distributions and correlations remain similar which may not hold. Recommendation: use the simulation as one input for setting realistic goals and emergency buffers rather than a guarantee, and stress test the plan with adverse scenarios beyond historical experience.
Asset classes
- Stocks 100%
The portfolio is 100% equities with zero allocation to bonds, cash, or alternatives. That delivers full growth exposure and maximizes long‑term upside but sacrifices traditional volatility dampening and income diversification. Typical balanced portfolios include fixed income to reduce short‑term swings; here the absence of bonds means the portfolio will track equity cycles closely. Recommendation: consider adding a non‑equity sleeve tailored to risk tolerance — even a modest bond or alternative allocation can reduce drawdown magnitude and provide liquidity for opportunistic buys during downturns.
Sectors
- Technology 26%
- Financials 14%
- Consumer Discretionary 12%
- Health Care 11%
- Industrials 10%
- Telecommunications 9%
- Energy 7%
- Consumer Staples 7%
- Basic Materials 2%
- Utilities 1%
- Real Estate 1%
Sector exposure is tilted toward technology (26%) with meaningful weights in financials, consumer cyclicals, and healthcare, while utilities and real estate are minimal. A tech tilt can boost returns in growth cycles but also raise sensitivity to rate moves and valuation shifts. Sector concentration matters because sector performance can deviate significantly from the market; heavy tech exposure increases cyclicality. Recommendation: decide whether the sector profile reflects a deliberate growth bias; if not, rebalance or introduce holdings with defensive or income characteristics to smooth returns across business cycles.
Regions
- North America 90%
- Europe Developed 7%
- Japan 2%
- Australasia 1%
Geographic exposure is strongly North America focused at about 90% with small allocations to Europe and Japan. Limited emerging market and broader international exposure reduces currency and economic diversification and increases dependence on US macro and corporate cycles. Geographic concentration can be a strength in a leadership market but a risk if US performance lags. Recommendation: if global diversification is an objective, add incremental developed ex‑US or emerging market exposure over time to better reflect global GDP and reduce single‑country risk.
Market capitalization
- Mega-cap 34%
- Large-cap 33%
- Mid-cap 17%
- Small-cap 9%
- Micro-cap 6%
Market‑cap-wise the portfolio skews toward mega and large caps (about 67% combined) with mid and small caps providing the remainder. This favors established companies and typically lowers volatility relative to a heavy small‑cap portfolio, while the small‑cap value ETF adds a value and size tilting element that can boost long‑term returns. Market cap mix affects both return drivers and volatility. Recommendation: monitor the intended small‑cap value exposure and avoid drift; consider whether the current small and micro cap percentages match the risk premium you want to capture.
Redundant positions
-
High correlationSchwab U.S. Large-Cap Growth ETFVanguard Total Stock Market Index Fund ETF Shares
There is a notable high correlation between the large‑cap growth ETF and the total stock market ETF. Correlation measures how assets move together; highly correlated holdings reduce diversification because they tend to rise and fall at the same time. Overlapping exposures can create redundancy where two ETFs effectively own the same underlying stocks. Recommendation: remove or replace overlapping exposures with lower‑correlation assets to improve diversification benefits — for example swap one overlapping ETF for a complementary exposure that behaves differently in stress periods.
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.
Efficient Frontier optimization finds the best risk‑return mix among available assets by comparing expected return per unit of risk; the Efficient Frontier is a curve of portfolios that offer the highest expected return for each level of risk. Optimization here should start by removing overlapping highly correlated assets because they add complexity without improving the frontier. Note efficiency is about risk‑return tradeoffs among current holdings not an absolute measure of diversification or suitability. Recommendation: run constrained mean‑variance optimization after pruning overlaps and consider adding bonds or alternatives to expand achievable risk‑return combinations.
Dividends
- Avantis® U.S. Small Cap Value ETF 1.60%
- iShares MSCI EAFE ETF 2.70%
- Schwab U.S. Dividend Equity ETF 2.80%
- Schwab U.S. Large-Cap Growth ETF 0.30%
- Vanguard Total Stock Market Index Fund ETF Shares 1.10%
- Weighted yield (per year) 1.49%
The portfolio’s blended dividend yield is modest at about 1.49% with the dividend ETF contributing the highest yield around 2.8% and the growth ETF contributing very little. Dividends provide income and can cushion returns through reinvestment, especially for investors seeking cash flow or lower volatility. For a growth‑oriented portfolio dividends are a secondary return source but still meaningful over decades due to compounding. Recommendation: if income is a goal increase allocation to higher‑yielding strategies; if growth is primary, accept lower current yield in exchange for capital appreciation.
Ongoing product costs
- Avantis® U.S. Small Cap Value ETF 0.25%
- iShares MSCI EAFE ETF 0.33%
- Schwab U.S. Dividend Equity ETF 0.06%
- Schwab U.S. Large-Cap Growth ETF 0.04%
- Vanguard Total Stock Market Index Fund ETF Shares 0.03%
- Weighted costs total (per year) 0.09%
Total expense ratio (TER) for the portfolio aggregates to about 0.09% which is impressively low and beneficial for long‑term returns because fees compound against performance. TER stands for Total Expense Ratio and is the annual fee charged by funds expressed as a percentage of assets. Low costs are a clear alignment with best practices and support better net returns. Recommendation: keep the overall cost base low but periodically review the higher fee components like the Avantis and EAFE ETFs to confirm their active or specialist value justifies the higher TER.
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