A growth-focused portfolio with high US exposure and moderate risk tolerance

Report created on Jan 6, 2025

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

1/5
Single-Focused
Less diversification More diversification

Positions

This portfolio is heavily weighted in equities, with 94.73% in stocks and a small allocation in bonds. The Vanguard Total Stock Market Index Fund dominates with 80%, indicating a strong focus on US equities. While this composition aligns with a growth profile, it may lack diversification, as a single ETF comprises the majority. A more balanced approach could involve adding more diverse asset types, such as international equities or alternative investments, to mitigate risk and enhance potential returns.

Growth Info

Historically, the portfolio has shown impressive performance with a CAGR of 17.28%. However, it experienced a significant max drawdown of -33.56%, highlighting its vulnerability during market downturns. This performance suggests a high growth potential but also underscores the importance of managing risk. Comparing this with a broad market index can provide insights into relative performance. Regularly reviewing past performance can help identify trends and adjust strategies as needed.

Projection Info

Monte Carlo simulations, which use historical data to project future outcomes, show a wide range of potential returns, with a 50th percentile outcome of 438%. While 988 out of 1,000 simulations resulted in positive returns, it's crucial to remember that these projections are based on past data and not guarantees. This highlights the potential for significant growth but also the inherent uncertainty. Continuously monitoring and adjusting the portfolio based on changing market conditions is advisable.

Asset classes Info

  • Stocks
    95%
  • Bonds
    5%

The portfolio is predominantly invested in stocks, with a minimal allocation to bonds and negligible cash holdings. This concentration in equities suggests a high-risk, high-reward strategy typical of growth-focused portfolios. While this aligns with a growth objective, diversifying across more asset classes could reduce volatility and provide more stable returns. Consider incorporating more fixed-income or alternative investments to balance the risk profile.

Sectors Info

  • Technology
    29%
  • Financials
    13%
  • Health Care
    11%
  • Consumer Discretionary
    10%
  • Industrials
    8%
  • Telecommunications
    8%
  • Consumer Staples
    5%
  • Energy
    4%
  • Real Estate
    2%
  • Utilities
    2%
  • Basic Materials
    2%

The portfolio has a strong concentration in technology at 29.34%, followed by financial services and healthcare. This sector allocation aligns with current growth trends but may increase volatility, especially if interest rates rise or tech valuations fluctuate. A more balanced exposure across different sectors could mitigate risks associated with sector-specific downturns. Adjusting sector weights periodically can help maintain alignment with market conditions and personal investment goals.

Regions Info

  • North America
    93%
  • Europe Developed
    1%

With 93.03% of the portfolio in North American assets, there's a significant home bias, limiting geographic diversification. Such a concentration can expose the portfolio to regional economic risks. Expanding exposure to international markets could enhance diversification and potentially improve risk-adjusted returns. A more global approach might include increasing allocations to emerging markets or developed regions outside North America.

Redundant positions Info

  • Vanguard Total Stock Market Index Fund ETF Shares
    Schwab U.S. Large-Cap Growth ETF
    High correlation

The portfolio's assets, particularly the Vanguard Total Stock Market Index Fund and Schwab U.S. Large-Cap Growth ETF, are highly correlated, reducing diversification benefits. This correlation implies that these assets tend to move in tandem, which can amplify risk during downturns. To enhance diversification, consider replacing or reducing holdings in highly correlated assets with those that have lower correlations, thereby improving the portfolio's resilience.

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 be optimized using the Efficient Frontier to achieve a better risk-return ratio. Currently, it has overlapping assets that contribute to inefficiency. By reallocating to reduce correlation and enhance diversification, the portfolio can potentially achieve higher returns with lower risk. Optimization involves adjusting the current asset mix to find the most efficient allocation, which maximizes returns for a given level of risk.

Dividends Info

  • Schwab U.S. Dividend Equity ETF 3.60%
  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • WisdomTree Floating Rate Treasury Fund 4.40%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Vanguard Total International Stock Index Fund ETF Shares 3.40%
  • Weighted yield (per year) 1.53%

The portfolio's total dividend yield stands at 1.53%, with the Schwab U.S. Dividend Equity ETF contributing the highest yield of 3.6%. While dividends can provide a steady income stream, the portfolio's focus on growth suggests that capital appreciation is the primary goal. Balancing dividend-paying assets with growth-oriented investments can provide both income and potential for capital gains, aligning with long-term wealth-building objectives.

Ongoing product costs Info

  • Schwab U.S. Dividend Equity ETF 0.06%
  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • WisdomTree Floating Rate Treasury Fund 0.15%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.04%

The portfolio boasts a low total expense ratio (TER) of 0.04%, which is commendable for keeping costs down and enhancing net returns over time. Low costs are crucial for maximizing long-term growth, as they prevent fees from eroding returns. Maintaining a focus on cost-effective investments, such as low-fee ETFs, can support better performance. Regularly reviewing and comparing fees can ensure continued cost efficiency.

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