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

Report created on Jan 9, 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 weighted towards U.S. equities, with a significant 65% allocation to the Vanguard S&P 500 ETF. It also includes individual stocks, like NVIDIA Corporation, and other ETFs focused on dividends and growth. This composition reflects a strong emphasis on growth, but it lacks diversification across different asset classes. Compared to common benchmarks, this portfolio is heavily concentrated in equities, which can increase potential returns but also heighten risk. To improve resilience, consider diversifying into other asset classes such as bonds or real estate, which can offer stability during market fluctuations.

Growth Info

The portfolio's historical performance shows a robust CAGR of 18.34%, indicating strong growth over time. However, it also experienced a significant max drawdown of -33.71%, highlighting potential volatility. Compared to benchmarks like the S&P 500, this performance is impressive but comes with higher risk. Understanding that past performance doesn't guarantee future results is crucial. To mitigate potential downturns, consider incorporating more conservative investments or increasing cash reserves, which can act as a buffer during market corrections.

Projection Info

Forward projections using Monte Carlo simulations suggest a wide range of potential outcomes, with a 5th percentile return of 160.39% and a 50th percentile return of 1,319.62%. The simulations indicate a high probability of positive returns, with 990 out of 1,000 simulations showing gains. Monte Carlo analysis uses historical data to simulate future performance, but it has limitations as it cannot predict unforeseen market events. To prepare for various scenarios, regularly review and adjust the portfolio in response to market changes and personal financial goals.

Asset classes Info

  • Stocks
    100%

The portfolio is overwhelmingly concentrated in stocks, accounting for over 99% of its assets. This lack of asset class diversification can lead to increased volatility and risk. In contrast, a balanced portfolio often includes a mix of stocks, bonds, and other assets to smooth returns and reduce risk. To enhance diversification, consider adding fixed income or alternative investments, which can provide stability and income during market downturns, balancing the high growth potential of equities.

Sectors Info

  • Technology
    36%
  • Financials
    13%
  • Health Care
    11%
  • Consumer Discretionary
    9%
  • Telecommunications
    8%
  • Industrials
    7%
  • Consumer Staples
    6%
  • Energy
    4%
  • Utilities
    2%
  • Basic Materials
    2%
  • Real Estate
    2%
  • Consumer Discretionary
    1%

With a 35.94% allocation to technology, the portfolio is heavily weighted towards this sector, which can lead to higher volatility, especially during market corrections or interest rate changes. Other sectors, such as financial services and healthcare, are also represented but to a lesser extent. Compared to benchmarks, this sector concentration may limit diversification benefits. To reduce sector-specific risks, consider reallocating some investments to underrepresented sectors, providing a more balanced exposure that can mitigate downturns in any single industry.

Regions Info

  • North America
    96%
  • Europe Developed
    2%
  • Asia Emerging
    1%
  • Japan
    1%

The portfolio's geographic exposure is predominantly in North America, accounting for 96.21% of its assets. This concentration limits international diversification, which can provide a hedge against regional economic downturns. Compared to global benchmarks, this allocation is heavily skewed, potentially missing out on growth opportunities in emerging markets. To enhance geographic diversification, consider increasing exposure to international markets, which can offer growth potential and reduce reliance on the U.S. economy.

Redundant positions Info

  • Schwab U.S. Large-Cap Growth ETF
    FIDELITY ZERO TOTAL MARKET INDEX FUND
    Vanguard S&P 500 ETF
    High correlation

The portfolio contains highly correlated assets, particularly among the Schwab U.S. Large-Cap Growth ETF, FIDELITY ZERO TOTAL MARKET INDEX FUND, and Vanguard S&P 500 ETF. High correlation means these assets tend to move together, reducing diversification benefits. In market downturns, this can lead to amplified losses. To improve diversification, consider replacing some of these correlated holdings with assets that have lower correlations, which can help stabilize returns and reduce overall portfolio risk.

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 allocation may not lie on the Efficient Frontier, which represents the best possible risk-return balance. The presence of highly correlated assets suggests an opportunity to optimize the portfolio by adjusting allocations. Optimization involves reallocating assets to achieve a better risk-return ratio without necessarily increasing diversification. Consider using tools or consulting with a financial advisor to explore how rebalancing can enhance efficiency, potentially improving returns without increasing risk.

Dividends Info

  • FIDELITY ZERO TOTAL MARKET INDEX FUND 1.20%
  • Schwab U.S. Dividend Equity ETF 3.60%
  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total International Stock Index Fund ETF Shares 3.40%
  • Weighted yield (per year) 1.37%

The portfolio's dividend yield is relatively modest at 1.37%, with contributions from funds like the Schwab U.S. Dividend Equity ETF and Vanguard Total International Stock Index Fund ETF Shares. Dividends can provide a steady income stream, especially in volatile markets. However, the focus on growth means dividends are not a primary source of returns. If income generation is a goal, consider increasing allocations to higher-yielding assets or dividend-focused funds, which can provide regular cash flow and complement growth investments.

Ongoing product costs Info

  • Schwab U.S. Dividend Equity ETF 0.06%
  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.03%

The portfolio benefits from impressively low costs, with a total expense ratio (TER) of 0.03%, which is below average for similar growth-focused portfolios. Low costs enhance long-term returns by minimizing the drag on performance. This efficient cost structure is a strong aspect of the portfolio, allowing more of the returns to compound over time. Continue to monitor and evaluate costs, ensuring that any changes in holdings maintain this low-cost advantage, which is crucial for maximizing net returns.

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