A growth-focused portfolio with high US exposure and limited diversification

Report created on Apr 10, 2025

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

1/5
Single-Focused
Less diversification More diversification

Positions

The portfolio is predominantly composed of the SPDR® Portfolio S&P 500 ETF, making up 90% of the allocation, with Berkshire Hathaway Inc. and JPMorgan Ultra-Short Income ETF each at 5%. This composition suggests a strong focus on US large-cap equities, with minimal diversification across other asset classes. A more balanced portfolio might include a broader range of asset types to mitigate risk and enhance potential returns. While the current setup may capture growth in the US market, adding international or alternative investments could improve diversification and resilience.

Growth Info

Historically, the portfolio has delivered a robust CAGR of 13.79%, significantly outperforming many benchmarks. However, it has also experienced a maximum drawdown of -32.54%, indicating substantial volatility. This performance reflects the inherent risk of being heavily weighted towards equities, particularly in times of market downturns. Investors should be aware that while past performance is strong, it does not guarantee future results. Diversifying across asset classes could help reduce volatility and smoothen returns over time, offering a more stable investment experience.

Projection Info

Monte Carlo simulations, which use historical data to project future outcomes, suggest a wide range of potential returns for the portfolio. With 1,000 simulations, the 5th percentile projects a 42.3% return, while the 50th and 67th percentiles project 317.6% and 449.0%, respectively. Although 985 simulations showed positive returns, it's important to remember that these projections are not certainties. They provide a probabilistic view of the future, highlighting the potential for significant growth but also underscoring the need for diversification to manage risk.

Asset classes Info

  • Stocks
    95%
  • Bonds
    3%
  • Cash
    2%

The portfolio is heavily skewed toward stocks, with 95% allocated to equities and only 5% to bonds and cash. This allocation reflects a high-risk, high-reward strategy typical of a growth-focused profile. While this may align with aggressive growth goals, it also exposes the portfolio to market volatility. Incorporating more bonds or alternative investments could provide a buffer against market swings and offer more consistent returns. A diversified asset class allocation is crucial for achieving long-term financial stability and reducing risk.

Sectors Info

  • Technology
    29%
  • Financials
    18%
  • Health Care
    10%
  • Consumer Discretionary
    9%
  • Telecommunications
    8%
  • Industrials
    7%
  • Consumer Staples
    5%
  • Energy
    3%
  • Utilities
    2%
  • Real Estate
    2%
  • Basic Materials
    2%

The sector allocation is concentrated, with technology (29%) and financial services (18%) comprising nearly half of the portfolio. While these sectors have driven recent market growth, they are also susceptible to specific economic cycles and regulatory changes. A tech-heavy portfolio might experience increased volatility during interest rate hikes or tech sector corrections. Balancing exposure across more sectors could mitigate these risks and provide more stable returns. Consideration of underrepresented sectors like utilities or consumer defensive could further diversify and stabilize the portfolio.

Regions Info

  • North America
    94%

The portfolio's geographic allocation is overwhelmingly North American, with 94% exposure. This heavy US focus may limit diversification benefits and expose the portfolio to regional economic risks. While the US market has performed well, global diversification can offer protection against localized downturns and access to growth opportunities abroad. Including investments from Europe, Asia, or emerging markets could enhance the portfolio's resilience and capture broader economic growth trends, potentially improving risk-adjusted returns.

Market capitalization Info

  • Mega-cap
    46%
  • Large-cap
    31%
  • Mid-cap
    17%
  • Small-cap
    1%

The portfolio predominantly consists of mega and large-cap stocks, with 46% in mega caps and 31% in large caps. This allocation provides stability and potential for steady growth but may miss out on the higher growth potential of mid and small-cap stocks. While larger companies tend to be more resilient during downturns, incorporating a mix of smaller companies could boost returns and enhance diversification. A more balanced market capitalization exposure can help capture a wider array of growth opportunities and reduce reliance on a few large entities.

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 be optimized for a better risk-return ratio using the Efficient Frontier, a concept that seeks the best possible returns for a given risk level. The current portfolio's expected return could be improved by adjusting asset allocations while maintaining the same risk level. However, achieving this requires careful consideration of asset correlations and market conditions. While the optimal portfolio has a lower expected return of 3.36%, it also has a significantly reduced risk level, highlighting the trade-off between risk and potential reward.

Dividends Info

  • JPMorgan Ultra-Short Income ETF 4.60%
  • SPDR® Portfolio S&P 500 ETF 1.40%
  • Weighted yield (per year) 1.49%

The portfolio's dividend yield is modest, with a total yield of 1.49%, primarily driven by the SPDR® Portfolio S&P 500 ETF and JPMorgan Ultra-Short Income ETF. While dividends are not the focus of a growth-oriented portfolio, they can provide a steady income stream and enhance total returns. Investors seeking income might consider increasing exposure to dividend-paying stocks or funds. Balancing growth and income investments can offer more consistent returns and help cushion against market downturns, aligning with a long-term wealth-building strategy.

Ongoing product costs Info

  • JPMorgan Ultra-Short Income ETF 0.18%
  • SPDR® Portfolio S&P 500 ETF 0.02%
  • Weighted costs total (per year) 0.03%

Portfolio costs are impressively low, with a total expense ratio (TER) of 0.03%. This cost efficiency supports better long-term performance by minimizing the drag on returns. Low fees are a significant advantage, especially for a growth-focused portfolio, as they allow more of the investment's returns to compound over time. Maintaining this cost structure is beneficial, but investors should remain vigilant about potential changes in fund fees or management costs. Regularly reviewing costs ensures the portfolio remains efficient and aligned with financial goals.

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