An aggressive growth-focused portfolio with high U.S. exposure and moderate sector diversification

Report created on Dec 22, 2024

Risk profile Info

6/7
Aggressive
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

The portfolio consists predominantly of equities, with a heavy focus on U.S. large-cap stocks and growth-oriented companies. A notable 11.5% allocation each to Schwab U.S. Large-Cap Growth ETF and Vanguard Total Stock Market Index Fund ETF reflects a strong tilt towards broad market exposure. However, individual stocks like Robinhood, Apple, and Tesla also hold significant weights. Compared to a typical benchmark, this portfolio is heavily skewed towards individual stocks, which might increase volatility. A more balanced allocation could include a wider variety of asset classes to enhance diversification and potentially reduce risk.

Growth Info

Historically, the portfolio has delivered a robust Compound Annual Growth Rate (CAGR) of 28.6%, indicating strong past performance. However, the maximum drawdown of -42.92% suggests significant volatility, which is typical for aggressive portfolios. For context, a benchmark like the S&P 500 often experiences lower drawdowns. While past performance is impressive, it is crucial to remember that historical results do not guarantee future outcomes. Investors should consider whether they are comfortable with the level of risk and volatility experienced in the past.

Projection Info

Monte Carlo simulations, which use historical data to project future outcomes, suggest a wide range of potential returns. The 50th percentile indicates a 1,743.43% increase, while the 5th percentile shows a potential -53.35% loss. These projections highlight the portfolio's aggressive nature, with a high probability of positive returns but also substantial downside risk. It's important to note that simulations are based on historical trends and cannot predict future performance with certainty. Investors should use these projections as one of several tools when considering potential adjustments.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily weighted towards equities, with 99.76% in stocks and minimal allocation to other asset classes like cash. This lack of diversification across asset classes may expose the portfolio to higher risk, particularly during market downturns. Typically, a more diversified portfolio might include bonds or alternative investments to balance risk and return. Consider reallocating a portion of the equity holdings to other asset classes to improve diversification and potentially lower overall portfolio risk.

Sectors Info

  • Technology
    38%
  • Consumer Discretionary
    22%
  • Financials
    19%
  • Consumer Staples
    9%
  • Health Care
    3%
  • Telecommunications
    3%
  • Industrials
    3%
  • Basic Materials
    1%
  • Energy
    1%
  • Real Estate
    1%
  • Utilities
    1%

Technology dominates the sector allocation, comprising 37.77% of the portfolio, followed by consumer cyclicals and financial services. This concentration could lead to increased volatility, especially if the tech sector faces downturns, as it often does during interest rate hikes. While these sectors have historically driven growth, a more diversified sector allocation could mitigate risk. Consider rebalancing to include more defensive sectors like utilities or healthcare, which may provide stability during volatile market periods.

Regions Info

  • North America
    91%
  • Europe Developed
    4%
  • Asia Emerging
    2%
  • Japan
    1%
  • Asia Developed
    1%

Geographic exposure is heavily skewed towards North America, accounting for 90.84% of the portfolio, with limited exposure to other regions. This concentration could increase sensitivity to U.S. market conditions and reduce the benefits of global diversification. A more balanced geographic allocation might include increased exposure to emerging markets or developed regions outside North America. Diversifying geographically can help mitigate regional risks and capture growth opportunities in different markets.

Redundant positions Info

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

The portfolio contains highly correlated assets, particularly between Schwab U.S. Large-Cap Growth ETF and Vanguard Total Stock Market Index Fund ETF. High correlation means these assets tend to move together, reducing diversification benefits. During market downturns, such overlap can amplify risks. To enhance diversification, consider replacing one of these ETFs with an asset that has lower correlation to the rest of the portfolio. This could help in achieving a more balanced risk 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 asset allocation could be optimized using the Efficient Frontier, which seeks the best possible risk-return ratio. However, before optimization, it's crucial to address the high correlation between certain assets, as this could limit diversification benefits. Rebalancing to reduce overlap and enhance diversification can improve the portfolio's efficiency. Remember, optimization focuses on the current assets and reallocating between them, not necessarily adding new ones. Aim for a balance that aligns with your risk tolerance and return objectives.

Dividends Info

  • Apple Inc 0.40%
  • Broadcom Inc 0.70%
  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.90%
  • Vanguard Total International Stock Index Fund ETF Shares 1.60%
  • Weighted yield (per year) 0.38%

The portfolio's dividend yield is relatively low at 0.38%, reflecting its focus on growth stocks rather than income-generating assets. While dividends can provide a steady income stream and cushion against market volatility, growth-focused investors may prioritize capital appreciation over dividends. If income is a goal, consider adding higher-yielding assets or dividend-focused funds to the portfolio. This could enhance returns through reinvested dividends, especially in stable market environments.

Ongoing product costs Info

  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.02%

Portfolio costs are impressively low, with Total Expense Ratios (TER) ranging from 0.03% to 0.08% for the ETFs. Low costs are beneficial for long-term performance as they preserve more of the portfolio's returns. This cost efficiency aligns well with best practices for managing an investment portfolio. However, continuously monitoring and comparing fees across similar investment options can ensure that the portfolio remains cost-effective. Keeping costs low without sacrificing quality is key to maximizing net returns.

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