A growth-focused portfolio with high risk and low diversification in North American equities

Report created on Jan 29, 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 the Vanguard Total Stock Market Index Fund ETF, making up nearly 65% of the total allocation. This dominance by a single ETF, alongside significant stakes in Royal Caribbean Cruises Ltd and T-Mobile US Inc, indicates a concentration in specific assets. Such a structure may expose the portfolio to unsystematic risk due to limited diversification. A more balanced allocation among different asset types could help mitigate this risk and enhance the portfolio's resilience against market volatility.

Growth Info

The portfolio has demonstrated a strong historic performance, with a Compound Annual Growth Rate (CAGR) of 17.17%. This impressive growth rate highlights the potential for substantial returns over time. However, it is important to note the significant max drawdown of -38.12%, which reflects the potential for considerable losses during market downturns. While past performance is no guarantee of future results, it is crucial to balance the pursuit of high returns with risk management strategies to protect against future downturns.

Projection Info

Forward projections using Monte Carlo simulations suggest a wide range of potential outcomes, with a median expected growth of 743.7%. Monte Carlo analysis uses historical data to simulate various market scenarios, providing insight into potential future performance. However, these projections are not guarantees, as they rely on past data and assumptions. It's advisable to maintain a diversified portfolio to manage risk and improve the likelihood of achieving favorable outcomes across different market conditions.

Asset classes Info

  • Stocks
    100%

The portfolio is entirely composed of stocks, which limits diversification benefits typically gained from including other asset classes such as bonds or real estate. A 100% stock allocation can lead to high volatility and increased risk, especially during market downturns. Diversifying across asset classes can help stabilize returns and reduce risk, providing a more balanced approach to portfolio management. Consider incorporating assets with different risk-return profiles to enhance overall diversification.

Sectors Info

  • Consumer Discretionary
    24%
  • Technology
    21%
  • Telecommunications
    18%
  • Financials
    10%
  • Health Care
    8%
  • Industrials
    6%
  • Consumer Staples
    4%
  • Energy
    3%
  • Real Estate
    2%
  • Utilities
    2%
  • Basic Materials
    1%

The sector allocation is heavily skewed towards Consumer Cyclicals and Technology, which together make up 45% of the portfolio. Such concentration can lead to increased volatility, especially if these sectors face downturns. While these sectors have historically driven growth, it's important to consider the potential impact of economic cycles and interest rate changes. Diversifying sector exposure can help mitigate risks and align the portfolio with broader market trends.

Regions Info

  • North America
    100%

The portfolio's geographic allocation is entirely focused on North America, offering no exposure to international markets. This lack of geographic diversification can increase vulnerability to regional economic downturns. While the U.S. market has been strong, global diversification can provide access to growth opportunities in emerging markets and reduce reliance on a single region. Considering international assets could enhance diversification and potentially improve risk-adjusted returns.

Market capitalization Info

  • Large-cap
    40%
  • Mega-cap
    39%
  • Mid-cap
    15%
  • Small-cap
    5%
  • Micro-cap
    2%

The portfolio is predominantly invested in large-cap stocks, with 79% allocated to big and mega-cap companies. While large-cap stocks are generally more stable, a lack of exposure to small and mid-cap stocks can limit growth potential. Smaller companies often offer higher growth opportunities but come with increased risk. Balancing market capitalization exposure can enhance diversification and provide a mix of stability and growth potential.

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 shows potential for optimization using the Efficient Frontier, which identifies the best possible risk-return ratios. By adjusting the weights of existing assets, it may be possible to achieve a more favorable balance between risk and return. This process does not necessarily involve adding new assets but focuses on reallocating current holdings to enhance efficiency. Exploring optimization strategies could help align the portfolio with desired risk-return objectives.

Dividends Info

  • Royal Caribbean Cruises Ltd 0.20%
  • Schwab U.S. Dividend Equity ETF 3.50%
  • T-Mobile US Inc 1.30%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.20%
  • Weighted yield (per year) 1.21%

The portfolio's dividend yield is relatively low at 1.21%, with the Schwab U.S. Dividend Equity ETF contributing the most at 3.50%. Dividends can provide a steady income stream and help cushion returns during volatile market periods. For growth-focused investors, dividends may be less of a priority, but they can still contribute to total returns. Evaluating the role of dividends in your strategy can help balance growth and income objectives.

Ongoing product costs Info

  • Schwab U.S. Dividend Equity ETF 0.06%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Weighted costs total (per year) 0.02%

The portfolio benefits from impressively low costs, with a total expense ratio (TER) of just 0.02%. Low costs are advantageous as they enhance long-term returns by minimizing the drag on performance. This efficient cost structure aligns well with best practices for maximizing investment returns. Maintaining a focus on low-cost investments can continue to support the portfolio's growth objectives without eroding returns.

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