A growth-oriented portfolio with high exposure to large-cap tech and low geographic diversity

Report created on Jan 5, 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 large-cap US stocks, with ETFs and a fund making up nearly 100% of its composition. This focus on large-cap equities aligns with a growth-oriented strategy, aiming for capital appreciation over time. However, compared to a standard diversified portfolio, this one lacks exposure to other asset classes such as bonds or international equities. To enhance diversification and potentially reduce risk, consider incorporating a wider range of asset types. Balancing growth with stability could help in managing volatility and achieving more consistent returns over the long term.

Growth Info

Historically, the portfolio has delivered impressive returns, boasting a Compound Annual Growth Rate (CAGR) of 15.51%. This performance surpasses typical market benchmarks, indicating effective growth potential. However, it's important to note the significant max drawdown of -32.79%, highlighting the portfolio's vulnerability during market downturns. While past performance can provide insights, it doesn't guarantee future results. To mitigate potential losses, consider strategies that can buffer against market volatility, such as diversifying into less correlated asset classes or incorporating defensive sectors.

Projection Info

The forward projection using Monte Carlo simulations reveals a wide range of potential outcomes, with a median return of 745.99%. Monte Carlo analysis uses historical data to predict future performance by simulating numerous scenarios, but remember, it's not foolproof due to market unpredictability. The high variability in projections underscores the portfolio's inherent risk. To improve confidence in future returns, consider rebalancing to maintain alignment with long-term goals. This may involve adjusting allocations to reduce reliance on high-risk assets and improve stability.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily skewed towards stocks, accounting for over 99% of the allocation, with minimal cash holdings. While this aligns with a growth-focused strategy, it also increases exposure to equity market volatility. Compared to more balanced portfolios, which might include bonds or real estate, this portfolio lacks diversification across asset classes. Introducing other asset classes could provide more stability, offering a cushion during equity market downturns. A more diversified asset allocation could help in achieving a smoother return profile over time.

Sectors Info

  • Technology
    40%
  • Financials
    11%
  • Health Care
    10%
  • Consumer Discretionary
    9%
  • Telecommunications
    8%
  • Industrials
    6%
  • Consumer Staples
    6%
  • Energy
    4%
  • Basic Materials
    1%
  • Utilities
    1%
  • Real Estate
    1%
  • Consumer Discretionary
    1%

Sector allocation is heavily tilted towards technology, comprising over 40% of the portfolio. While this sector has historically driven growth, it also introduces volatility, especially during periods of regulatory scrutiny or economic shifts. Compared to a typical benchmark like the S&P 500, this portfolio is highly concentrated in tech. Diversifying across sectors could mitigate sector-specific risks and enhance stability. Consider increasing exposure to underrepresented sectors like utilities or consumer defensives to balance the tech-heavy focus and reduce potential volatility.

Regions Info

  • North America
    99%

Geographically, the portfolio is overwhelmingly focused on North America, with over 99% of assets based there. This concentration limits exposure to global markets and their growth opportunities. Compared to more geographically diversified portfolios, this one lacks the potential benefits of international diversification, such as currency fluctuation hedging and access to emerging markets. Expanding geographic exposure could help mitigate region-specific risks and tap into broader economic growth. Consider exploring investments in Europe, Asia, or emerging markets to enhance diversification and potential returns.

Redundant positions Info

  • Vanguard S&P 500 ETF
    Technology Select Sector SPDR® Fund
    Vanguard Information Technology Index Fund ETF Shares
    Fidelity 500 Index Fund
    Schwab U.S. Large-Cap Growth ETF
    High correlation

The high correlation among assets, particularly within the large-cap and technology-focused ETFs, limits diversification benefits. When assets move together, the portfolio is more susceptible to market swings, reducing the effectiveness of risk management strategies. While correlated assets can amplify gains during bull markets, they also exacerbate losses during downturns. To enhance diversification, consider replacing some overlapping assets with those that have lower correlations. This could involve adding assets from different sectors or geographic regions to create 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 benefit from optimization using the Efficient Frontier, which identifies the best possible risk-return ratio. By adjusting asset weights, the portfolio could achieve a more favorable balance between risk and return. However, it's crucial to note that optimization focuses on existing assets, not introducing new ones. Consider reallocating within current holdings to enhance efficiency. This might involve reducing exposure to highly correlated assets and increasing weights in less correlated or underrepresented areas for a more balanced risk profile.

Dividends Info

  • Fidelity 500 Index Fund 1.20%
  • Schwab U.S. Dividend Equity ETF 3.60%
  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • Vanguard Information Technology Index Fund ETF Shares 0.60%
  • Vanguard S&P 500 ETF 1.20%
  • Technology Select Sector SPDR® Fund 0.50%
  • Weighted yield (per year) 1.45%

The portfolio's dividend yield stands at 1.45%, which is relatively modest for a growth-oriented portfolio. While dividends contribute to total returns, the focus here is clearly on capital appreciation rather than income generation. For investors seeking income, this yield might be insufficient. However, for those prioritizing growth, reinvesting dividends can compound returns over time. If income becomes a goal, consider increasing allocations to higher-yielding assets or dividend-focused funds to enhance the portfolio's income-generating potential.

Ongoing product costs Info

  • Fidelity 500 Index Fund 0.02%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • Vanguard Information Technology Index Fund ETF Shares 0.10%
  • Vanguard S&P 500 ETF 0.03%
  • Technology Select Sector SPDR® Fund 0.09%
  • Weighted costs total (per year) 0.05%

The portfolio's costs are impressively low, with a Total Expense Ratio (TER) of 0.05%. This is beneficial for long-term performance, as lower costs mean more of your money is working for you. Compared to average mutual funds, which often have higher fees, this portfolio is well-positioned to maximize returns. Keeping costs low is a key component of successful investing. Continue monitoring expense ratios and consider replacing any high-fee assets with lower-cost alternatives to maintain cost efficiency and improve net returns.

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