A growth-focused portfolio with high U.S. equity concentration and limited international exposure

Report created on Jan 13, 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 ETFs and common stocks making up nearly the entire allocation. The largest holdings include the Schwab U.S. Dividend Equity ETF and the Vanguard S&P 500 ETF, which are core components in many growth-oriented portfolios. This composition aligns with a typical growth strategy, emphasizing capital appreciation over income generation. However, the low diversity score suggests a need for greater diversification to mitigate risks associated with market volatility. Consider incorporating more diverse asset classes or geographic regions to achieve a more balanced risk-return profile.

Growth Info

The portfolio has demonstrated strong historical performance with a Compound Annual Growth Rate (CAGR) of 14.87%. This indicates robust growth, outperforming many standard benchmarks. However, the maximum drawdown of -24.36% highlights vulnerability during market downturns. The concentration of returns within a small number of days suggests reliance on specific market events or sectors. While past performance is encouraging, it's important to remember that it doesn't guarantee future results. To enhance resilience, consider strategies that reduce drawdown risk, such as diversifying into less correlated assets.

Projection Info

Monte Carlo simulations, which use historical data to model potential future outcomes, predict a wide range of potential results for this portfolio. The median projection shows a potential increase of 406.14%, but there's also a 5th percentile outcome of -46.03%, indicating significant downside risk. While the annualized return across simulations is promising at 17.11%, it's crucial to acknowledge the inherent uncertainty in these projections. To prepare for various market conditions, consider stress-testing the portfolio against different economic scenarios and adjusting allocations to better manage potential risks.

Asset classes Info

  • Stocks
    100%

The portfolio is overwhelmingly concentrated in stocks, accounting for over 99% of the allocation, leaving minimal exposure to other asset classes like bonds or cash. This high equity concentration aligns with a growth strategy but may increase volatility, especially during market downturns. Diversifying into other asset classes could help stabilize returns and reduce risk. Consider adding fixed income or alternative investments to create a more balanced portfolio, which can provide a cushion during periods of stock market turbulence while potentially enhancing long-term risk-adjusted returns.

Sectors Info

  • Technology
    28%
  • Consumer Staples
    14%
  • Consumer Discretionary
    13%
  • Health Care
    12%
  • Financials
    10%
  • Industrials
    7%
  • Telecommunications
    7%
  • Energy
    5%
  • Basic Materials
    2%
  • Utilities
    1%
  • Real Estate
    1%

Sector allocation reveals a significant tilt towards technology, consumer defensive, and healthcare sectors, which together form over half of the portfolio. This concentration can lead to higher volatility, especially if these sectors face adverse conditions. While tech-heavy allocations can drive growth, they may also be sensitive to interest rate changes and regulatory shifts. To mitigate sector-specific risks, consider diversifying into underrepresented sectors like utilities or real estate. This can help balance the portfolio and provide exposure to different economic cycles, potentially smoothing overall returns.

Regions Info

  • North America
    97%
  • Asia Developed
    1%
  • Europe Developed
    1%

The portfolio is heavily skewed towards North American assets, comprising over 97% of the allocation. This geographic concentration limits exposure to international markets, which can offer growth opportunities and diversification benefits. While U.S. equities have been strong performers, global diversification can help reduce country-specific risks and tap into emerging market growth. Consider increasing allocations to developed and emerging markets outside North America to enhance diversification and potentially improve the portfolio's risk-return profile over the long term.

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 could benefit from optimization using the Efficient Frontier, which seeks the best possible risk-return ratio. This involves adjusting allocations among existing assets to achieve a more efficient portfolio. While optimization doesn't guarantee diversification, it can enhance the risk-return profile by identifying the most effective asset mix. Consider using optimization tools to explore potential allocation changes, focusing on maximizing returns for a given level of risk. This approach can help refine the portfolio strategy, ensuring it aligns with the investor's risk tolerance and financial goals.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.60%
  • Alphabet Inc Class A 0.30%
  • Microsoft Corporation 0.70%
  • Invesco Aerospace & Defense ETF 0.30%
  • Invesco ESG NASDAQ 100 ETF 0.40%
  • Schwab U.S. Dividend Equity ETF 3.70%
  • VanEck Semiconductor ETF 0.40%
  • Vanguard Health Care Index Fund ETF Shares 1.10%
  • Vanguard S&P 500 ETF 1.30%
  • Weighted yield (per year) 1.44%

The portfolio's dividend yield stands at 1.44%, with the Schwab U.S. Dividend Equity ETF contributing significantly at 3.7%. While dividends provide a steady income stream, the overall yield is relatively modest given the growth focus. Dividends can enhance total returns and provide a buffer during market downturns. For investors seeking more income, consider increasing allocations to higher-yielding assets. However, ensure that dividend-focused investments align with long-term growth objectives. Balancing growth and income can create a more robust portfolio, catering to both capital appreciation and cash flow needs.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Invesco Aerospace & Defense ETF 0.58%
  • Invesco ESG NASDAQ 100 ETF 0.20%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • VanEck Semiconductor ETF 0.35%
  • Vanguard Health Care Index Fund ETF Shares 0.10%
  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.11%

The portfolio's total expense ratio (TER) is impressively low at 0.11%, indicating cost efficiency. Lower costs can significantly boost long-term returns, as fees compound over time. The use of low-cost ETFs like the Vanguard S&P 500 ETF contributes to this efficiency. Keeping costs low is a positive aspect of this portfolio, aligning with best practices for maximizing net returns. Regularly review expense ratios and consider replacing higher-cost funds with more affordable alternatives to maintain cost-effectiveness. This strategy supports better long-term performance by preserving more of the portfolio's gains.

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