A growth-focused portfolio with high correlation and limited sector diversity

Report created on Feb 21, 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 three ETFs: SPDR S&P 500 ETF Trust, Schwab U.S. Large-Cap Growth ETF, and Vanguard S&P 500 ETF, each making up roughly a third of the portfolio. This composition results in a concentrated exposure to large-cap U.S. equities, which may not provide adequate diversification. A well-diversified portfolio typically includes a mix of asset classes, such as bonds or international equities, to mitigate risk. Consider introducing different asset classes to enhance diversification and potentially smooth out returns during market volatility.

Growth Info

Historically, the portfolio has shown strong performance with a CAGR of 15.10%, indicating robust growth over time. However, it also experienced a significant max drawdown of -33.33%, reflecting vulnerability during market downturns. This performance is in line with high-growth portfolios, which often exhibit both higher returns and greater volatility. Comparing this to a benchmark like the S&P 500 can provide context for these figures. Consider strategies to mitigate drawdown risk, such as incorporating more defensive assets or increasing cash reserves.

Projection Info

Forward projections using Monte Carlo simulations suggest a positive outlook, with a median annualized return of 16.46%. Monte Carlo simulations use historical data to project potential outcomes, but it's important to note that they don't guarantee future results. With 991 out of 1,000 simulations showing positive returns, the portfolio appears well-positioned for growth. However, relying solely on historical data can be misleading, as past performance does not predict future results. Regularly revisiting asset allocation and risk management strategies is advisable.

Asset classes Info

  • Stocks
    100%

The portfolio is entirely composed of stocks, lacking exposure to other asset classes like bonds or real estate. This single asset class focus can lead to increased volatility and risk during market downturns. Diversification across asset classes helps spread risk and can provide more stable returns. Consider adding other asset classes to the portfolio to enhance its risk-return profile. For instance, integrating fixed-income securities may provide a buffer against equity market fluctuations.

Sectors Info

  • Technology
    38%
  • Consumer Discretionary
    12%
  • Financials
    11%
  • Telecommunications
    11%
  • Health Care
    10%
  • Industrials
    6%
  • Consumer Staples
    4%
  • Energy
    2%
  • Utilities
    2%
  • Basic Materials
    2%
  • Real Estate
    2%

The portfolio is heavily concentrated in the technology sector, which comprises 38% of the holdings. This sectoral concentration can lead to higher volatility, especially during periods of regulatory changes or economic shifts impacting tech companies. While technology has been a strong performer, diversifying into other sectors can reduce risk and improve stability. Consider increasing exposure to sectors like healthcare or consumer staples, which may offer more consistent performance in varied market conditions.

Regions Info

  • North America
    100%

With 100% of the portfolio's geographic allocation in North America, there is a lack of international exposure. This over-reliance on a single region can increase vulnerability to regional economic downturns or policy changes. Diversification across different geographic regions can reduce risk and potentially enhance returns by capturing growth opportunities in emerging markets or developed economies outside North America. Consider adding international equities to balance the geographic exposure.

Market capitalization Info

  • Mega-cap
    53%
  • Large-cap
    31%
  • Mid-cap
    16%
  • Small-cap
    1%

The portfolio is predominantly allocated to mega-cap and big-cap stocks, totaling 84% of the holdings. While these companies often provide stability and are well-established, they may not offer the same growth potential as smaller-cap stocks. Including a mix of small and mid-cap stocks can enhance diversification and provide opportunities for higher growth. Balancing market capitalization exposure can help capture gains from various segments of the market.

Redundant positions Info

  • SPDR S&P 500 ETF Trust
    Vanguard S&P 500 ETF
    Schwab U.S. Large-Cap Growth ETF
    High correlation

The portfolio's assets are highly correlated, particularly between the SPDR S&P 500 ETF Trust, Vanguard S&P 500 ETF, and Schwab U.S. Large-Cap Growth ETF. High correlation means that these assets tend to move in the same direction, limiting diversification benefits. During market downturns, this can lead to significant portfolio losses. Reducing correlation by diversifying into less correlated assets or sectors can help manage risk and improve 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.

Optimizing the portfolio using the Efficient Frontier could enhance the risk-return balance. The Efficient Frontier represents the best possible risk-return ratio for a given set of assets. However, the current portfolio's high correlation limits diversification benefits. Before optimizing, consider reducing overlapping assets to achieve better diversification. This will allow for more effective use of the Efficient Frontier in balancing risk and return.

Dividends Info

  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • SPDR S&P 500 ETF Trust 1.20%
  • Vanguard S&P 500 ETF 1.20%
  • Weighted yield (per year) 0.94%

The portfolio's dividend yield is relatively low at 0.94%, reflecting its growth-oriented focus. While dividends can provide a steady income stream, growth portfolios typically prioritize capital appreciation over income. For investors seeking income, incorporating higher-yielding assets could be beneficial. However, for those focused on growth, the current yield aligns with the portfolio's objectives. Consider the role of dividends in your overall investment strategy and adjust as needed.

Ongoing product costs Info

  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • SPDR S&P 500 ETF Trust 0.10%
  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.06%

The portfolio's total expense ratio (TER) is quite low at 0.06%, indicating efficient cost management. Low costs are beneficial for long-term performance, as they minimize the drag on returns. This aligns well with best practices in portfolio management, where keeping expenses low is crucial. Ensure that any new investments or adjustments maintain this cost efficiency to support optimal long-term growth.

What next?

Ready to invest in this portfolio?

Select a broker that fits your needs and watch for low fees to maximize your returns.

Select broker

Create your own report?

Analyze your portfolio

Join our community!

Join Discord

The information provided on this platform is for informational purposes only and should not be considered as financial or investment advice. Insightfolio does not provide investment advice, personalized recommendations, or guidance regarding the purchase, holding, or sale of financial assets. The tools and content are intended for educational purposes only and are not tailored to individual circumstances, financial needs, or objectives.

Insightfolio assumes no liability for the accuracy, completeness, or reliability of the information presented. Users are solely responsible for verifying the information and making independent decisions based on their own research and careful consideration. Use of the platform should not replace consultation with qualified financial professionals.

Investments involve risks. Users should be aware that the value of investments may fluctuate and that past performance is not an indicator of future results. Investment decisions should be based on personal financial goals, risk tolerance, and independent evaluation of relevant information.

Insightfolio does not endorse or guarantee the suitability of any particular financial product, security, or strategy. Any projections, forecasts, or hypothetical scenarios presented on the platform are for illustrative purposes only and are not guarantees of future outcomes.

By accessing the services, information, or content offered by Insightfolio, users acknowledge and agree to these terms of the disclaimer. If you do not agree to these terms, please do not use our platform.

Instrument logos provided by Elbstream.

Help us improve Insightfolio

Your feedback makes a difference! Share your thoughts in our quick survey. Take the survey