A growth-focused portfolio with high concentration in U.S. large-cap equities

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

This portfolio is heavily weighted towards U.S. large-cap equities, with 47.5% in the Schwab U.S. Large-Cap Growth ETF and another 47.5% in the Vanguard Total Stock Market Index Fund ETF. The Invesco NASDAQ 100 ETF makes up the remaining 5%. Such concentration suggests a focus on growth, but it limits exposure to other asset classes. Compared to typical diversified portfolios, this one lacks balance, which could impact risk-adjusted returns. Consider incorporating other asset types like bonds or international equities to enhance diversification and potentially stabilize returns over market cycles.

Growth Info

Historically, this portfolio has performed well, boasting a CAGR of 15.59%. This impressive growth rate indicates strong past performance, especially when compared to broader market indices. However, it's important to remember that past performance doesn't guarantee future results. The maximum drawdown of -30.01% highlights the potential for significant volatility. To mitigate this risk, consider strategies that balance growth with downside protection, such as adding defensive stocks or low-volatility funds.

Projection Info

The forward projection, based on a Monte Carlo simulation, suggests a wide range of potential outcomes. With 1,000 simulations, the portfolio's annualized return is estimated at 17.23%. While this indicates strong growth potential, the projections rely on historical data, which may not account for future market changes. The 5th percentile projection shows a 95.62% return, emphasizing the uncertainty involved. To prepare for different scenarios, consider maintaining a flexible investment strategy that can adapt to market conditions.

Asset classes Info

  • Stocks
    100%

The portfolio is almost entirely composed of stocks, with a negligible cash allocation. This singular focus on equities can amplify growth during bull markets but also increases vulnerability to market downturns. Compared to more balanced portfolios, which might include bonds or real estate, this asset allocation lacks diversification. To enhance stability, consider diversifying into other asset classes that can provide income and reduce volatility, like fixed income or real assets.

Sectors Info

  • Technology
    40%
  • Consumer Discretionary
    12%
  • Telecommunications
    11%
  • Health Care
    11%
  • Financials
    10%
  • Industrials
    6%
  • Consumer Staples
    4%
  • Energy
    2%
  • Basic Materials
    2%
  • Real Estate
    2%
  • Utilities
    2%

The portfolio has a significant tilt towards the technology sector, comprising nearly 40% of the allocation. While this sector has historically driven strong returns, it also comes with higher volatility, especially during periods of interest rate changes. Other sectors like consumer cyclicals and healthcare provide some balance, but the overall concentration in tech suggests a need for diversification. Consider increasing exposure to sectors like utilities or consumer defensives to reduce risk.

Regions Info

  • North America
    100%

Geographically, the portfolio is overwhelmingly concentrated in North America, with over 99% exposure. This limited geographic diversification might expose the portfolio to region-specific risks and miss out on growth opportunities in other parts of the world. Compared to global benchmarks, this allocation is heavily skewed. To improve diversification and capture international growth, consider adding funds with exposure to Europe, Asia, and other emerging markets.

Redundant positions Info

  • Schwab U.S. Large-Cap Growth ETF
    Invesco NASDAQ 100 ETF
    High correlation

The portfolio's assets, particularly the Schwab U.S. Large-Cap Growth ETF and the Invesco NASDAQ 100 ETF, are highly correlated. This means they often move in tandem, which can limit diversification benefits. In times of market stress, such high correlation could lead to amplified losses. To improve diversification, consider replacing one of these ETFs with assets that have lower correlation, such as international equities or bonds.

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 potentially benefit from optimization using the Efficient Frontier. This concept involves adjusting asset weights to achieve the best possible risk-return ratio. However, optimization should focus on reducing the overlap of highly correlated assets, like the Schwab U.S. Large-Cap Growth and Invesco NASDAQ 100 ETFs. By diversifying into uncorrelated assets, the portfolio can enhance its efficiency without compromising growth potential.

Dividends Info

  • Invesco NASDAQ 100 ETF 0.60%
  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Weighted yield (per year) 0.84%

The portfolio's dividend yield is modest at 0.84%, with the Vanguard Total Stock Market Index Fund ETF contributing the most. While dividends provide a steady income stream, the focus here is clearly on growth rather than income generation. For investors seeking higher income, consider incorporating dividend-focused ETFs or stocks with higher yields. This can provide a buffer during market downturns and contribute to total returns.

Ongoing product costs Info

  • Invesco NASDAQ 100 ETF 0.15%
  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Weighted costs total (per year) 0.04%

The portfolio's total expense ratio (TER) is impressively low at 0.04%, which is beneficial for long-term performance. Low costs mean more of your returns stay in your pocket, enhancing compounding over time. This aligns well with best practices for cost-effective investing. To maintain this advantage, regularly review fund fees and consider replacing any high-cost funds with more affordable alternatives.

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