A growth-focused portfolio with high U.S. exposure and low diversification

Report created on Jan 21, 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 two ETFs: Vanguard S&P 500 ETF at 60.37% and Schwab U.S. Large-Cap Growth ETF at 39.63%. Both are equity-focused, resulting in a 100% stock allocation. Compared to a typical growth benchmark, this portfolio lacks diversification across asset classes. A broader mix could better balance risk and returns, such as incorporating bonds or international equities to mitigate potential U.S. market volatility.

Growth Info

Historically, the portfolio has performed well, with a Compound Annual Growth Rate (CAGR) of 15.54%. This is impressive when compared to typical market indices. However, it also experienced a significant max drawdown of -33.32%, indicating substantial risk during downturns. While past performance is encouraging, it doesn't guarantee future results, so diversifying could help reduce such drawdowns.

Projection Info

Using Monte Carlo simulations, which predict future outcomes based on historical data, the portfolio shows a promising median potential growth of 680.4%. However, 5% of simulations indicate only a 117.8% gain, highlighting possible volatility. While simulations provide insights, they rely on past data and assumptions, so actual results may vary. Regularly reviewing and adjusting the portfolio can help manage future risks.

Asset classes Info

  • Stocks
    100%

The portfolio's allocation is entirely in stocks, lacking exposure to other asset classes like bonds or real estate. This limits diversification, potentially increasing risk. Including other asset classes could provide stability, particularly during stock market downturns. A diversified portfolio typically includes a mix of equities, fixed income, and alternative investments to balance growth and risk.

Sectors Info

  • Technology
    39%
  • Consumer Discretionary
    12%
  • Telecommunications
    11%
  • Financials
    11%
  • Health Care
    10%
  • Industrials
    6%
  • Consumer Staples
    4%
  • Energy
    2%
  • Utilities
    2%
  • Basic Materials
    2%
  • Real Estate
    2%

Sector-wise, the portfolio is concentrated, with technology at 39%, followed by consumer cyclicals and communication services. This tech-heavy focus can lead to higher volatility, especially if interest rates rise. Balancing sector exposure by including more defensive sectors like utilities or consumer staples could reduce risk. Aligning sector weights more closely with broader indices may enhance stability.

Regions Info

  • North America
    100%

Geographically, the portfolio is concentrated in North America, with 100% exposure. This lack of international diversification can increase vulnerability to U.S. economic changes. Including assets from Europe or Asia could reduce regional risk and capture growth opportunities abroad. A more balanced geographic allocation aligns with global benchmarks and offers broader diversification.

Market capitalization Info

  • Mega-cap
    55%
  • Large-cap
    29%
  • Mid-cap
    15%
  • Small-cap
    1%

The portfolio is primarily invested in mega-cap stocks at 55%, with lesser exposure to big and medium caps. This focus on large companies provides stability but may limit growth potential from smaller, innovative firms. Diversifying across market capitalizations can enhance growth opportunities and risk management. Including small-cap stocks can add dynamism to the portfolio.

Redundant positions Info

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

The assets in the portfolio are highly correlated, moving similarly in market conditions. This correlation limits diversification benefits, particularly during downturns. Reducing overlap by adding uncorrelated assets can enhance risk management and provide smoother returns. A portfolio with lower correlation between assets is better positioned to weather market volatility.

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.

To optimize risk versus return, the portfolio could benefit from adjusting its allocation along the Efficient Frontier. This involves finding the best possible risk-return ratio by diversifying across different assets. Currently, the portfolio's high correlation limits its efficiency. By integrating less correlated assets, you can achieve a more optimal balance, potentially improving returns without increasing risk.

Dividends Info

  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • Vanguard S&P 500 ETF 1.20%
  • Weighted yield (per year) 0.88%

The portfolio's dividend yield is 0.88%, with the Vanguard S&P 500 ETF contributing more at 1.20%. While dividends provide steady income, this yield is modest for income-focused investors. Reinvesting dividends can boost long-term growth. For those seeking higher income, considering dividend-focused funds or stocks might be beneficial.

Ongoing product costs Info

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

The portfolio's costs are impressively low, with a total expense ratio (TER) of 0.03%. This aligns well with best practices, as lower costs can significantly enhance long-term returns. Keeping expenses minimal allows more of your investment to compound over time. Continually monitoring and managing costs is a prudent strategy for maximizing portfolio performance.

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