A growth-focused US-centric portfolio with low diversity and high correlation among assets

Report created on Jan 3, 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 primarily composed of US equity index funds, with a significant concentration in the Vanguard Institutional Index Fund at 56.5%. This heavy weighting suggests a focus on large-cap US stocks. While the allocation reflects a growth-oriented strategy, it lacks diversification across asset classes and regions. A more balanced portfolio typically includes a mix of equities, bonds, and other asset classes. To enhance diversification, consider including international stocks or bonds, which can reduce overall risk and provide exposure to different economic cycles.

Growth Info

The portfolio has demonstrated strong historical performance, with a Compound Annual Growth Rate (CAGR) of 14.16%. This indicates robust growth over time, outperforming many common benchmarks. However, the maximum drawdown of -34.04% highlights significant volatility, typical of growth-focused portfolios. While past performance is encouraging, it's essential to remember that it doesn't guarantee future results. To mitigate potential risks, consider diversifying the portfolio to include more defensive assets, which can help cushion against downturns.

Projection Info

Using Monte Carlo simulations, which project potential future outcomes based on historical data, the portfolio shows promising forward projections. The median outcome suggests a potential return of 320.21%. However, the range of outcomes is broad, with a 5th percentile return of 37.3% and a 67th percentile return of 464.3%. This variability underscores the uncertainty inherent in investing. While the simulations are optimistic, they rely on historical data and assumptions that may not hold. Regularly reviewing and adjusting the portfolio can help align it with changing market conditions and personal goals.

Asset classes Info

  • Stocks
    99%

The portfolio is heavily weighted towards stocks, comprising nearly 99% of the allocation, with a negligible cash position. This concentration in equities aligns with a growth strategy but limits diversification benefits. In contrast, a more diversified portfolio might include bonds or alternative investments to balance risk. Introducing other asset classes can reduce volatility and provide more stable returns over time. Consider integrating bonds or real assets to achieve a more balanced risk-return profile, especially if seeking to lower overall portfolio risk.

Sectors Info

  • Technology
    34%
  • Financials
    12%
  • Consumer Discretionary
    12%
  • Health Care
    10%
  • Telecommunications
    9%
  • Industrials
    8%
  • Consumer Staples
    5%
  • Energy
    3%
  • Real Estate
    3%
  • Utilities
    2%
  • Basic Materials
    2%

The portfolio's sector allocation is notably concentrated, with a significant 33.5% in Technology. While this sector has driven past growth, it can also lead to higher volatility, especially during periods of market correction or interest rate hikes. Financial Services and Consumer Cyclical sectors also have substantial weights. To enhance sector diversification, consider increasing exposure to underrepresented sectors like Utilities or Consumer Defensive, which can offer stability during market downturns. Balancing sector weights can help manage risks associated with sector-specific downturns.

Regions Info

  • North America
    99%

The portfolio's geographic allocation is overwhelmingly concentrated in North America at 98.68%, with minimal exposure to other regions. This heavy focus on the US market limits diversification and exposes the portfolio to region-specific risks. A more geographically diversified portfolio typically includes significant allocations to international markets, which can provide exposure to different economic environments and growth opportunities. Consider increasing allocations to Europe, Asia, or emerging markets to enhance geographic diversification and reduce reliance on a single economic region.

Redundant positions Info

  • VANGUARD GROWTH INDEX FUND ADMIRAL SHARES
    VANGUARD TOTAL STOCK MARKET INDEX FUND ADMIRAL SHARES
    VANGUARD SMALL-CAP INDEX FUND ADMIRAL SHARES
    VANGUARD INSTITUTIONAL INDEX FUND INSTITUTIONAL SHARES
    VANGUARD MID-CAP INDEX FUND ADMIRAL SHARES
    High correlation

The portfolio's assets are highly correlated, meaning they tend to move in the same direction. While this can amplify gains during market upswings, it also increases risk during downturns, as losses are likely to be magnified. High correlation limits the diversification benefits, as the portfolio doesn't have assets that perform differently under varying market conditions. To improve diversification, consider adding less correlated assets, such as bonds or international equities, which can provide a buffer during market volatility and enhance overall portfolio 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.

The portfolio could benefit from optimization using the Efficient Frontier, which identifies the best possible risk-return ratio. Currently, the portfolio's high correlation among assets suggests room for improvement. By adjusting allocations or incorporating less correlated assets, the portfolio can achieve a more efficient balance. However, it's important to note that optimization is based solely on current assets and their allocation. While it can enhance returns for a given level of risk, it may not address other goals, such as income generation or specific sector exposure.

Dividends Info

  • VANGUARD GROWTH INDEX FUND ADMIRAL SHARES 0.30%
  • VANGUARD MID-CAP INDEX FUND ADMIRAL SHARES 1.10%
  • VANGUARD INSTITUTIONAL INDEX FUND INSTITUTIONAL SHARES 0.90%
  • Vanguard Federal Money Market Fund Investor Shares 4.70%
  • VANGUARD SMALL-CAP INDEX FUND ADMIRAL SHARES 1.30%
  • VANGUARD TOTAL STOCK MARKET INDEX FUND ADMIRAL SHARES 1.30%
  • Weighted yield (per year) 0.91%

The portfolio's dividend yield is relatively low at 0.91%, reflecting its growth orientation. While dividends can provide a steady income stream, this portfolio prioritizes capital appreciation over income generation. For investors seeking regular income, increasing exposure to higher-yielding assets, such as dividend-focused funds or bonds, could be beneficial. However, if the primary goal is growth, maintaining a lower dividend yield might be appropriate, as it often indicates reinvestment in growth opportunities. Balancing growth and income needs is crucial for aligning the portfolio with financial goals.

Ongoing product costs Info

  • VANGUARD GROWTH INDEX FUND ADMIRAL SHARES 0.05%
  • VANGUARD MID-CAP INDEX FUND ADMIRAL SHARES 0.05%
  • VANGUARD INSTITUTIONAL INDEX FUND INSTITUTIONAL SHARES 0.04%
  • VANGUARD SMALL-CAP INDEX FUND ADMIRAL SHARES 0.05%
  • VANGUARD TOTAL STOCK MARKET INDEX FUND ADMIRAL SHARES 0.04%
  • Weighted costs total (per year) 0.04%

The portfolio's costs are impressively low, with an overall Total Expense Ratio (TER) of 0.04%. This efficient cost structure supports better long-term performance by minimizing fees that can erode returns. Low costs are a significant advantage, especially in a growth-focused portfolio where compounding returns are crucial. Maintaining this cost advantage is beneficial, but it's also essential to ensure that low costs don't come at the expense of diversification or quality. Regularly reviewing the cost-effectiveness of each holding can help maintain a balanced approach.

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