A growth-focused portfolio with a strong emphasis on US equities and moderate diversification

Report created on Feb 14, 2025

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

The portfolio is heavily invested in US equities, with a notable allocation to large-cap, mid-cap, and small-cap index funds. The largest holding is a large-cap S&P 500 index fund, making up 31.7% of the portfolio. This composition aligns with a growth-focused strategy but may lack exposure to other asset classes like bonds or real estate, which could provide additional diversification. To achieve a more balanced portfolio, consider introducing other asset classes that can help mitigate risk during market downturns.

Growth Info

Historically, the portfolio has achieved a Compound Annual Growth Rate (CAGR) of 5.98%, which is a respectable return for a growth-focused strategy. However, it experienced a significant maximum drawdown of -36.52%, indicating vulnerability during market downturns. Comparing this performance to a benchmark index can provide more context on its relative success. While past performance is not a guarantee of future results, it is crucial to assess whether this level of volatility aligns with your risk tolerance.

Projection Info

Monte Carlo simulations, which use historical data to project future outcomes, indicate a wide range of potential returns for this portfolio. The simulations suggest a 5th percentile outcome of -56.5% and a 50th percentile outcome of 68.6%. While these projections offer valuable insights, they are not definitive predictions and should be considered alongside other factors. Given the potential for significant losses, it's essential to evaluate whether this risk level aligns with your investment goals and time horizon.

Asset classes Info

  • Stocks
    99%
  • Cash
    1%

The portfolio is overwhelmingly allocated to stocks, comprising 99% of the total assets, with only 1% in cash. This stock-heavy allocation is typical for a growth-oriented strategy but may expose the portfolio to higher volatility. Diversification into other asset classes, such as bonds or real estate, could provide stability and reduce risk. Consider whether the current allocation aligns with your risk tolerance and long-term investment objectives.

Sectors Info

  • Technology
    21%
  • Financials
    17%
  • Industrials
    15%
  • Consumer Discretionary
    11%
  • Health Care
    10%
  • Consumer Staples
    6%
  • Basic Materials
    5%
  • Real Estate
    5%
  • Energy
    5%
  • Telecommunications
    4%
  • Utilities
    2%

The portfolio is diversified across several sectors, with a notable concentration in technology (21%), financial services (17%), and industrials (15%). This sector allocation is consistent with growth strategies but may lead to increased volatility, particularly in technology-heavy periods. To mitigate sector-specific risks, consider adjusting allocations to achieve a more balanced sectoral exposure, ensuring alignment with broader market trends and benchmarks.

Regions Info

  • North America
    83%
  • Europe Developed
    13%
  • Japan
    3%
  • Asia Developed
    1%

Geographically, the portfolio is heavily tilted towards North America, with 83% of assets allocated there. This concentration could limit exposure to growth opportunities in other regions. While the US market has performed well historically, diversifying geographically can reduce regional risk and capture growth in emerging markets. Evaluating the potential benefits of increasing international exposure, particularly in underrepresented regions, may enhance overall portfolio diversification.

Market capitalization Info

  • Small-cap
    30%
  • Mega-cap
    20%
  • Large-cap
    20%
  • Mid-cap
    19%
  • Micro-cap
    11%

The portfolio's market capitalization distribution is weighted towards small caps (30%), with mega and big caps each at 20%, and medium caps at 19%. This allocation reflects a growth-oriented approach, potentially offering higher returns but with increased risk. Small-cap stocks can be more volatile, so it's essential to assess whether this distribution aligns with your risk tolerance. Balancing market capitalization exposure could help achieve a more stable risk-return profile.

Redundant positions Info

  • SMALLCAP S&P 600 INDEX FUND CLASS J
    MIDCAP S&P 400 INDEX FUND R-3
    High correlation

The portfolio contains highly correlated assets, particularly between the small-cap and mid-cap index funds. High correlation means these assets tend to move together, reducing the diversification benefits. During market downturns, this can amplify losses. Consider reducing overlap by diversifying into assets with lower correlations, which can enhance risk management and improve overall portfolio resilience.

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 potentially be optimized using the Efficient Frontier, which aims to achieve the best possible risk-return ratio with the current assets. Currently, some overlapping assets may limit efficiency. By adjusting allocations and reducing high correlations, the portfolio could achieve a higher expected return of 9.94% with a risk level of 18.01%. This optimization focuses on improving the risk-return balance, not necessarily diversification.

Ongoing product costs Info

  • MFS INTERNATIONAL VALUE FUND R6 0.69%
  • LARGECAP S&P 500 INDEX FUND CLASS A 0.38%
  • MIDCAP S&P 400 INDEX FUND R-3 0.73%
  • SMALLCAP S&P 600 INDEX FUND CLASS J 0.44%
  • Weighted costs total (per year) 0.54%

The portfolio's Total Expense Ratio (TER) is 0.54%, with individual fund costs ranging from 0.38% to 0.73%. These costs are moderate and could impact long-term returns. Lowering costs can enhance net returns over time, so it's worth exploring lower-cost alternatives or funds with similar strategies but lower fees. Regularly reviewing and optimizing costs is a crucial step in maximizing portfolio efficiency.

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