A growth-focused portfolio with high U.S. exposure and significant tech sector concentration

Report created on Dec 14, 2024

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 skewed towards equities, with 99.87% in stocks and a mere 0.13% in cash. The largest holding is the Vanguard S&P 500 ETF, making up 35% of the portfolio, followed by the Schwab U.S. Large-Cap Growth ETF at 20%. This concentration suggests a focus on large-cap U.S. equities. The portfolio also includes small-cap value and dividend-focused ETFs, though these are smaller components. Understanding composition is crucial as it dictates potential returns and risks. Consider diversifying with other asset classes like bonds or international equities to balance risk and enhance returns.

Growth Info

Historically, the portfolio has delivered a strong Compound Annual Growth Rate (CAGR) of 19.52%, though it experienced a significant maximum drawdown of -34.75%. This indicates high volatility, which is typical for growth-focused portfolios. The performance also highlights that a small number of days contributed to most of the returns, emphasizing the importance of staying invested during volatile periods. While past performance is not a guarantee of future results, it can provide insights into how the portfolio might react to market fluctuations. Regularly reviewing performance can help ensure alignment with investment goals.

Projection Info

Using Monte Carlo simulations, the portfolio's future performance has been projected with a range of potential outcomes. The simulations suggest a 50th percentile outcome of nearly 994% growth, with a 5th percentile at 128%. These projections are based on historical data, which may not account for future market changes. Monte Carlo analysis helps in understanding the range of possible outcomes and the likelihood of achieving specific returns. It’s important to remember that projections are speculative and should be used as one of many tools in decision-making. Regularly revisiting projections can help in adjusting strategies as needed.

Asset classes Info

  • Stocks
    100%

The portfolio's allocation is heavily concentrated in stocks, with almost no exposure to other asset classes. This lack of diversification can lead to increased volatility and risk, especially during market downturns. Diversification across different asset classes, such as bonds or real estate, can help mitigate risk and provide more stable returns. A more balanced portfolio can weather market fluctuations better and offer more consistent performance. Consider reallocating a portion of the portfolio into other asset classes to achieve a more diversified and potentially less volatile investment strategy.

Sectors Info

  • Technology
    39%
  • Financials
    13%
  • Consumer Discretionary
    10%
  • Health Care
    9%
  • Industrials
    8%
  • Telecommunications
    7%
  • Energy
    5%
  • Consumer Staples
    5%
  • Basic Materials
    2%
  • Utilities
    1%
  • Real Estate
    1%

With 38.65% of the portfolio in technology, there is a significant sector concentration, which can lead to volatility if the tech sector underperforms. Other sectors like financial services and consumer cyclicals are represented but to a lesser extent. Sector diversification is critical to managing risk, as different sectors perform differently under various economic conditions. Balancing exposure across multiple sectors can help protect against downturns in any single sector. Consider diversifying into sectors that are underrepresented in the portfolio to achieve a more balanced and resilient investment strategy.

Regions Info

  • North America
    99%

The portfolio is predominantly exposed to North America, with 99.20% allocated to this region. This geographic concentration limits diversification and increases vulnerability to regional economic downturns. Global diversification can reduce risk by spreading investments across different economic environments. Investing in international markets can provide exposure to growth opportunities outside the U.S. and help balance regional risks. Consider increasing exposure to developed and emerging markets outside North America to enhance diversification and capitalize on global growth potential.

Redundant positions Info

  • Vanguard Information Technology Index Fund ETF Shares
    Schwab U.S. Large-Cap Growth ETF
    High correlation

The portfolio contains highly correlated assets, particularly between the Vanguard Information Technology Index Fund ETF Shares and the Schwab U.S. Large-Cap Growth ETF. High correlation means these assets tend to move in the same direction, reducing diversification benefits. Diversification aims to combine assets that do not move together, thereby reducing overall portfolio risk. Consider replacing one of the correlated assets with a less correlated alternative to enhance diversification and improve risk management. This adjustment can help achieve a more balanced and resilient 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 portfolio can potentially be optimized using the Efficient Frontier, which seeks the best possible risk-return ratio with the current assets. This involves adjusting allocations to achieve the highest expected return for a given level of risk. Optimization does not guarantee diversification or align with all investment goals, but it can improve efficiency. Consider rebalancing the portfolio to better align with the Efficient Frontier, ensuring that the risk taken is justified by potential returns. Regular optimization can help maintain an efficient portfolio as market conditions and goals evolve.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.50%
  • Schwab U.S. Dividend Equity ETF 2.60%
  • Schwab U.S. Large-Cap Growth ETF 0.30%
  • Vanguard Information Technology Index Fund ETF Shares 0.60%
  • Vanguard S&P 500 ETF 1.20%
  • Weighted yield (per year) 1.18%

The portfolio has a moderate dividend yield of 1.18%, with the Schwab U.S. Dividend Equity ETF contributing the highest yield at 2.6%. Dividends can provide a steady income stream and contribute to total returns, especially during market downturns. While growth is the primary focus, maintaining some dividend exposure can offer stability and income. Consider increasing allocation to dividend-paying assets if income is a priority, or maintain the current balance if growth remains the primary goal. Balancing growth and income can help achieve a well-rounded investment strategy.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • Vanguard Information Technology Index Fund ETF Shares 0.10%
  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.08%

The portfolio has a low total expense ratio (TER) of 0.08%, which is advantageous for long-term growth as lower costs mean more returns are retained. The Avantis U.S. Small Cap Value ETF has the highest expense ratio at 0.25%, while the Vanguard S&P 500 ETF is the most cost-effective at 0.03%. Keeping costs low is crucial for maximizing net returns over time. Regularly reviewing and optimizing the portfolio for cost efficiency can enhance overall performance. Consider replacing higher-cost assets with similar lower-cost alternatives to further reduce expenses and improve returns.

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