A growth-focused portfolio with high concentration in U.S. equities and limited diversification

Report created on Dec 17, 2024

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 primarily composed of U.S.-based equity ETFs and common stocks, with a significant focus on large-cap companies. The Schwab U.S. Dividend Equity ETF and Vanguard S&P 500 ETF together account for nearly half of the portfolio, indicating a strong emphasis on dividend-paying and broad market exposure. The presence of Amazon and Alphabet adds exposure to individual stocks with growth potential. This composition suggests a strategy focused on capital appreciation with some income generation through dividends. Diversifying into other asset classes could help balance risk and enhance returns over time.

Growth Info

Historically, the portfolio has demonstrated a compound annual growth rate (CAGR) of 10.98%, reflecting strong past performance. However, it also experienced a maximum drawdown of -30.66%, indicating significant volatility. The fact that 90% of returns were achieved in just 8 days highlights the portfolio's sensitivity to market movements. While historical performance can provide insights, it is not a guarantee of future returns. Considering this volatility, it may be beneficial to explore ways to mitigate risk through diversification.

Projection Info

Using Monte Carlo simulations, the portfolio's future performance was projected under various market conditions. With 1,000 simulations, the median outcome indicated a potential loss of 50.05%, while only 306 simulations resulted in positive returns. This suggests a wide range of possible outcomes, emphasizing the portfolio's risk. Monte Carlo simulations use historical data to model potential future scenarios, but they cannot predict actual results. To improve the probability of favorable outcomes, consider adjusting asset allocation to better manage risk.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily weighted towards stocks, with 99.95% of assets in equities and a negligible cash position. This concentration in a single asset class increases exposure to market risk, which could lead to significant fluctuations in value. A more balanced allocation across different asset classes, such as bonds or alternative investments, could provide stability and reduce overall risk. Diversifying into different asset classes can help achieve a more resilient portfolio that can better weather market downturns.

Sectors Info

  • Consumer Discretionary
    29%
  • Telecommunications
    22%
  • Technology
    16%
  • Financials
    8%
  • Health Care
    7%
  • Consumer Staples
    6%
  • Industrials
    5%
  • Energy
    4%
  • Basic Materials
    1%
  • Utilities
    1%
  • Real Estate
    1%

The portfolio features a notable concentration in consumer cyclicals, communication services, and technology sectors. These sectors are known for growth potential but can also be volatile. A more balanced sector allocation could reduce risk and improve stability. Consider increasing exposure to sectors like healthcare or utilities, which may offer more consistent performance. By diversifying sector exposure, the portfolio can potentially achieve a more stable performance across different economic cycles.

Regions Info

  • North America
    99%

With 99.42% of assets allocated to North America, the portfolio has limited geographic diversification. This concentration makes it vulnerable to region-specific economic downturns. Expanding exposure to international markets, such as Europe or Asia, could enhance diversification and reduce risk. Geographic diversification can help capture growth opportunities in different regions and mitigate the impact of local economic fluctuations. Consider exploring global ETFs or foreign stocks to broaden geographic exposure.

Redundant positions Info

  • Vanguard S&P 500 ETF
    Invesco QQQ Trust
    High correlation

The portfolio contains highly correlated assets, such as the Vanguard S&P 500 ETF and Invesco QQQ Trust, which tend to move together. This high correlation reduces diversification benefits and can amplify risk during market downturns. To improve diversification, consider replacing or reducing exposure to these correlated assets. Introducing assets with low or negative correlations can help balance the portfolio and reduce overall risk, leading to a more resilient investment strategy.

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 aims to achieve the best possible risk-return ratio. By adjusting the allocation among existing assets, the portfolio could improve efficiency without necessarily adding new investments. This process involves balancing risk and return to maximize potential gains while minimizing exposure to risk. Consider using optimization tools to explore different allocation scenarios and identify opportunities for enhancing portfolio performance.

Dividends Info

  • Alphabet Inc Class C 0.30%
  • Invesco QQQ Trust 0.60%
  • Schwab U.S. Dividend Equity ETF 3.60%
  • Target Corporation 3.40%
  • Vanguard S&P 500 ETF 1.20%
  • Weighted yield (per year) 1.34%

The portfolio's dividend yield stands at 1.34%, with significant contributions from the Schwab U.S. Dividend Equity ETF and Target Corporation. While dividend income can provide a steady cash flow, it is relatively low compared to the market average. To enhance income potential, consider increasing exposure to higher-yielding assets or dividend-focused strategies. This approach can help boost total returns, especially in periods of market volatility, while providing a cushion against price fluctuations.

Ongoing product costs Info

  • Invesco QQQ Trust 0.20%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.05%

The portfolio's total expense ratio (TER) is 0.05%, with the Vanguard S&P 500 ETF offering the lowest cost at 0.03%. While these fees are relatively low, minimizing costs can still enhance long-term returns. Consider reviewing the expense ratios of current holdings and exploring lower-cost alternatives. Reducing costs can have a significant impact over time, as even small differences in fees can compound, leading to improved net returns and more efficient wealth accumulation.

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