A growth-focused portfolio with high concentration in large-cap US equities

Report created on Jan 3, 2025

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

This portfolio is heavily weighted towards large-cap US equities, with 80% allocated to the Schwab U.S. Large-Cap Growth ETF and Vanguard S&P 500 ETF. The remaining 20% is in the Vanguard Mid-Cap Index Fund ETF Shares. A typical growth portfolio often includes a mix of asset classes for diversification, but this portfolio's reliance on a single asset class limits its diversity. Consider incorporating other asset classes like bonds or international equities to enhance diversification and potentially reduce risk.

Growth Info

The portfolio's historical performance shows a Compound Annual Growth Rate (CAGR) of 15.07%, which is impressive. However, it also experienced a maximum drawdown of -34.19%, indicating significant volatility. This suggests that while the portfolio has delivered strong returns, it has also been subject to considerable risk. Comparing this to a benchmark like the S&P 500 can provide context, as similar growth-focused portfolios may exhibit similar volatility.

Projection Info

The Monte Carlo simulation projects a wide range of potential outcomes, with a median return of 528.3% over the investment horizon. This tool uses historical data to simulate thousands of possible future scenarios, highlighting the uncertainty inherent in investing. While the median projection is optimistic, remember that past performance and simulations are not guarantees of future results. Consider diversifying to mitigate potential downside risks.

Asset classes Info

  • Stocks
    100%

The portfolio is almost entirely invested in stocks, with a negligible cash position. This concentration in a single asset class increases exposure to market volatility. A more diversified portfolio typically includes a mix of stocks, bonds, and perhaps alternative investments. By adding different asset classes, you can potentially reduce risk and smooth out returns, especially during market downturns.

Sectors Info

  • Technology
    36%
  • Consumer Discretionary
    11%
  • Financials
    11%
  • Health Care
    10%
  • Telecommunications
    9%
  • Industrials
    8%
  • Consumer Staples
    4%
  • Utilities
    3%
  • Real Estate
    3%
  • Energy
    3%
  • Basic Materials
    2%

The portfolio is heavily weighted towards the technology sector, making up nearly 36% of the total allocation. While tech stocks have driven significant growth in recent years, they can also be more volatile, particularly during periods of rising interest rates. Balancing sector exposure by adding weight to underrepresented sectors like healthcare or consumer defensive could help stabilize returns and reduce risk.

Regions Info

  • North America
    99%

The portfolio's geographic exposure is overwhelmingly North American, with over 99% of assets in this region. This lack of international diversification can limit opportunities and increase vulnerability to regional economic downturns. Consider expanding geographic exposure to include developed and emerging markets outside North America to enhance diversification and capture global growth opportunities.

Redundant positions Info

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

The assets in this portfolio are highly correlated, meaning they tend to move in the same direction. This correlation can limit diversification benefits, especially during market downturns when all assets may decline simultaneously. Reducing asset overlap and adding less correlated investments could enhance diversification and better manage risk, providing a more balanced portfolio.

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 using the Efficient Frontier, which seeks the best risk-return ratio. However, before optimizing, address the high correlation among assets. By incorporating less correlated assets, the portfolio can achieve a more efficient balance. Remember, efficiency here refers to risk-return optimization, not necessarily diversification.

Dividends Info

  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • Vanguard Mid-Cap Index Fund ETF Shares 1.90%
  • Vanguard S&P 500 ETF 1.20%
  • Weighted yield (per year) 1.02%

The portfolio's overall dividend yield is 1.02%, with contributions from each ETF. While dividend income can provide a cushion during market volatility, the focus here is on growth rather than income. For investors seeking higher income, consider adding assets with higher dividend yields. However, be mindful of the trade-off between growth potential and income generation.

Ongoing product costs Info

  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • Vanguard Mid-Cap Index Fund ETF Shares 0.04%
  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.04%

The portfolio's total expense ratio (TER) is impressively low at 0.04%, which is a positive aspect. Low costs contribute to better long-term returns, as fees can significantly erode gains over time. Maintaining low costs should remain a priority, as it supports the overall efficiency of the portfolio. Continue to monitor fees and consider low-cost alternatives if necessary.

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