A growth-focused US-heavy portfolio with high tech exposure and moderate sector diversification
Report created on Jan 1, 2025Risk profile
5/7
Diversification profile
3/5
Positions
-
VT Vanguard Total Stock Market Index Fund ETF Shares
VTI - US9229087690 28.00% -
SC Schwab U.S. Broad Market ETF
SCHB - US8085241029 25.00% -
VO Vanguard S&P 500 ETF
VOO - US9229083632 25.00% -
SC Schwab International Equity ETF
SCHF - US8085248057 7.50% -
SC Schwab U.S. Large-Cap Growth ETF
SCHG - US8085243009 7.50% -
AV Avantis® U.S. Small Cap Value ETF
AVUV - US0250728773 5.00% -
SC Schwab Emerging Markets Equity ETF
SCHE - US8085247067 2.00%
The portfolio is heavily weighted towards US equities, with 99.8% in stocks, and minimal cash and bonds. This composition leans towards growth, typical for investors seeking capital appreciation over income. Compared to a balanced benchmark, this portfolio has a higher equity concentration, indicating a more aggressive stance. To balance growth with stability, consider adding bonds or cash equivalents to reduce overall volatility and enhance diversification. This approach can provide a cushion against market downturns, offering peace of mind during volatile periods.
Growth
Historically, the portfolio has demonstrated strong performance, with a Compound Annual Growth Rate (CAGR) of 16.19%. This impressive return outpaces many market benchmarks, reflecting the portfolio's growth orientation. However, the maximum drawdown of -34.89% highlights its vulnerability during market downturns. While past performance is not indicative of future results, understanding these metrics helps set realistic expectations. To mitigate potential losses, consider incorporating defensive assets or strategies that can provide downside protection without significantly compromising growth potential.
Projection
Monte Carlo simulations project a wide range of potential outcomes, using historical data to model future performance. With a median outcome of 532.56% and a 5th percentile of 43.4%, the projections indicate a favorable risk-return balance. However, the reliance on past data means these projections are not guarantees. To improve predictability, consider diversifying with assets that historically perform well in various market conditions. This approach can help stabilize returns and reduce reliance on optimistic projections, providing a more resilient portfolio.
Asset classes
- Stocks 100%
The portfolio's allocation is overwhelmingly in stocks, with minimal allocation to other asset classes. This singular focus on equities limits diversification benefits typically gained from a mix of asset classes like bonds or real estate. Compared to diversified benchmarks, this portfolio is less balanced, which could increase risk during market downturns. To enhance diversification, consider adding non-equity asset classes. This strategy can improve risk management by spreading exposure across different economic environments, potentially smoothing out returns over time.
Sectors
- Technology 30%
- Financials 14%
- Consumer Discretionary 11%
- Health Care 10%
- Industrials 9%
- Telecommunications 8%
- Consumer Staples 5%
- Energy 4%
- Basic Materials 3%
- Utilities 2%
- Real Estate 2%
The portfolio is heavily concentrated in the technology sector at 30.09%, which is significantly higher than typical benchmark allocations. While this can drive growth during tech booms, it may also increase volatility, especially during periods of regulatory scrutiny or tech market corrections. A more balanced sector allocation could reduce risk and provide stability. Consider redistributing some tech exposure to underrepresented sectors like utilities or consumer staples, which can offer defensive characteristics and income potential.
Regions
- North America 91%
- Europe Developed 4%
- Japan 2%
- Asia Emerging 1%
- Asia Developed 1%
- Australasia 1%
The portfolio's geographic exposure is predominantly in North America at 90.68%, with limited international diversification. This heavy US focus aligns with the growth profile but may miss opportunities in emerging markets or Europe. A more globally diversified portfolio can reduce regional risk and capture growth in other economies. Consider increasing exposure to international markets, particularly those with favorable growth prospects or undervalued opportunities. This strategy can enhance diversification and potentially improve long-term returns.
Redundant positions
-
High correlationSchwab U.S. Broad Market ETFVanguard S&P 500 ETFVanguard Total Stock Market Index Fund ETF Shares
The portfolio contains highly correlated assets, particularly among broad market ETFs like Schwab U.S. Broad Market ETF and Vanguard S&P 500 ETF. High correlation means these assets tend to move in tandem, limiting diversification benefits. In a downturn, this could result in larger losses. To improve diversification, consider replacing some of these overlapping assets with alternatives that have lower correlation. This approach can reduce risk and enhance the portfolio's resilience against 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 portfolio could benefit from optimization using the Efficient Frontier, which seeks the best risk-return trade-off. Currently, high correlations among assets limit diversification, which could be improved by adjusting allocations. By reallocating between existing assets, the portfolio can achieve a more efficient risk-return ratio. However, this optimization is based on current holdings and does not guarantee diversification. Consider refining the asset mix to better align with Efficient Frontier principles, enhancing portfolio performance without adding undue risk.
Dividends
- Avantis® U.S. Small Cap Value ETF 1.60%
- Schwab U.S. Broad Market ETF 0.90%
- Schwab Emerging Markets Equity ETF 3.00%
- Schwab International Equity ETF 2.00%
- Schwab U.S. Large-Cap Growth ETF 0.40%
- Vanguard S&P 500 ETF 1.20%
- Vanguard Total Stock Market Index Fund ETF Shares 1.30%
- Weighted yield (per year) 1.21%
The portfolio's dividend yield is relatively low at 1.21%, reflecting its growth orientation. Dividends can provide a steady income stream, which is beneficial during market downturns. However, a focus on growth often means lower yields as companies reinvest profits. To increase income potential, consider adding higher-yielding assets or funds. This can enhance cash flow and provide a buffer during periods of market stress, without significantly altering the growth focus of the portfolio.
Ongoing product costs
- Avantis® U.S. Small Cap Value ETF 0.25%
- Schwab U.S. Broad Market ETF 0.03%
- Schwab Emerging Markets Equity ETF 0.11%
- Schwab International Equity ETF 0.06%
- Schwab U.S. Large-Cap Growth ETF 0.04%
- Vanguard S&P 500 ETF 0.03%
- Vanguard Total Stock Market Index Fund ETF Shares 0.03%
- Weighted costs total (per year) 0.05%
The portfolio's total expense ratio (TER) is impressively low at 0.05%, which is advantageous for long-term performance. Low costs mean more of your returns are retained, compounding over time to boost overall gains. Compared to industry averages, this portfolio is cost-efficient, supporting better net returns. Continue to monitor expense ratios and consider replacing any higher-cost assets with more cost-effective alternatives. This vigilance ensures that the portfolio remains optimized for cost efficiency, maximizing potential returns.
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