A balanced US-focused portfolio with strong growth potential but high correlation in large-cap equities

Report created on Jan 10, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

4/5
Broadly Diversified
Less diversification More diversification

Positions

The portfolio is heavily weighted in large-cap US equities, with a 50% allocation to the Vanguard S&P 500 ETF and 30% to the Schwab U.S. Large-Cap Growth ETF. The remaining 20% is in the Vanguard Total International Stock Index Fund ETF, providing some international exposure. This composition is typical for a balanced portfolio, emphasizing growth through prominent US companies. However, the high concentration in US equities might limit diversification benefits. Consider slightly increasing international exposure or adding different asset classes to achieve a more diversified risk-return profile.

Growth Info

Historically, the portfolio has performed well, with a Compound Annual Growth Rate (CAGR) of 13.76%. This indicates strong growth over time, outperforming many standard benchmarks. However, it also experienced a significant maximum drawdown of -33.32%, highlighting potential volatility. While past performance can offer insights, it's important to remember that it doesn't guarantee future results. Investors may want to consider adding assets with lower volatility to mitigate potential downturns in the future.

Projection Info

Forward projections using Monte Carlo simulations suggest robust growth potential, with a median outcome of 402.89% over the simulation period. Monte Carlo analysis uses historical data to simulate a range of possible future outcomes. While 990 out of 1,000 simulations showed positive returns, it's crucial to recognize that these are hypothetical scenarios and not guarantees. To better manage risk, consider diversifying into assets that might perform differently under various market conditions.

Asset classes Info

  • Stocks
    100%

The portfolio is overwhelmingly concentrated in stocks, accounting for over 99% of the assets. While this can drive growth, it also increases exposure to market volatility. A more balanced allocation across different asset classes, such as bonds or alternative investments, could provide a buffer against market downturns. This diversification can help stabilize returns and reduce overall portfolio risk, aligning with a balanced investment strategy.

Sectors Info

  • Technology
    33%
  • Financials
    13%
  • Consumer Discretionary
    11%
  • Health Care
    10%
  • Telecommunications
    9%
  • Industrials
    8%
  • Consumer Staples
    5%
  • Energy
    3%
  • Basic Materials
    3%
  • Utilities
    2%
  • Real Estate
    2%

The portfolio is heavily concentrated in the technology sector, making up over 33% of the allocation. While this sector has driven significant growth, it also introduces higher volatility, particularly during periods of economic uncertainty or interest rate changes. Balancing sector weights by increasing exposure to more stable sectors like healthcare or consumer defensives could reduce risk and enhance stability. A more even sector distribution aligns with diversification best practices.

Regions Info

  • North America
    81%
  • Europe Developed
    8%
  • Asia Emerging
    3%
  • Japan
    3%
  • Asia Developed
    2%
  • Australasia
    1%
  • Africa/Middle East
    1%

With over 81% of the portfolio allocated to North American assets, there's a significant home bias. While this concentration has historically benefited from the strong performance of US markets, it limits exposure to growth opportunities in other regions. Increasing allocations to emerging markets or underrepresented areas like Europe or Asia could enhance diversification and capture global growth trends. This adjustment would better align with a balanced global investment approach.

Redundant positions Info

  • Schwab U.S. Large-Cap Growth ETF
    Vanguard S&P 500 ETF
    High correlation

The Schwab U.S. Large-Cap Growth ETF and Vanguard S&P 500 ETF are highly correlated, meaning they tend to move together. This reduces the diversification benefits within the portfolio, as similar assets respond similarly to market changes. To improve diversification, consider replacing one of these ETFs with an asset that has a lower correlation to the existing holdings. This could help manage risk and enhance the portfolio's resilience during market volatility.

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 current portfolio could benefit from optimization along the Efficient Frontier, focusing on achieving the best risk-return ratio. By adjusting the weights between existing assets and potentially introducing less correlated assets, you can improve efficiency. This doesn't necessarily mean adding more assets but reallocating within the existing ones for optimal performance. Efficient optimization can help achieve a balanced approach to risk and return, aligning with your investment goals.

Dividends Info

  • 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) 1.40%

The portfolio's overall dividend yield is 1.4%, with contributions from all ETFs. This yield provides a modest income stream, which can be valuable for reinvestment or income generation. While growth-focused, the inclusion of dividend-paying assets adds a layer of stability and potential income. Investors seeking higher income might consider increasing allocation to higher-yielding assets, balancing growth with income generation.

Ongoing product costs Info

  • 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) 0.04%

The portfolio's total expense ratio (TER) is impressively low at 0.04%, indicating cost efficiency. Low costs are crucial for maximizing returns over the long term, as they minimize the erosion of gains. This aligns well with best practices in investment management, ensuring more of your money works for you. Maintaining this cost structure while exploring additional diversification options can enhance overall portfolio performance.

What next?

Ready to invest in this portfolio?

Select a broker that fits your needs and watch for low fees to maximize your returns.

Select broker

Create your own report?

Analyze your portfolio

Join our community!

Join Discord

The information provided on this platform is for informational purposes only and should not be considered as financial or investment advice. Insightfolio does not provide investment advice, personalized recommendations, or guidance regarding the purchase, holding, or sale of financial assets. The tools and content are intended for educational purposes only and are not tailored to individual circumstances, financial needs, or objectives.

Insightfolio assumes no liability for the accuracy, completeness, or reliability of the information presented. Users are solely responsible for verifying the information and making independent decisions based on their own research and careful consideration. Use of the platform should not replace consultation with qualified financial professionals.

Investments involve risks. Users should be aware that the value of investments may fluctuate and that past performance is not an indicator of future results. Investment decisions should be based on personal financial goals, risk tolerance, and independent evaluation of relevant information.

Insightfolio does not endorse or guarantee the suitability of any particular financial product, security, or strategy. Any projections, forecasts, or hypothetical scenarios presented on the platform are for illustrative purposes only and are not guarantees of future outcomes.

By accessing the services, information, or content offered by Insightfolio, users acknowledge and agree to these terms of the disclaimer. If you do not agree to these terms, please do not use our platform.

Instrument logos provided by Elbstream.

Help us improve Insightfolio

Your feedback makes a difference! Share your thoughts in our quick survey. Take the survey