A concentrated US large-cap equity portfolio with strong growth potential and low diversification
Report created on Jan 12, 2025Risk profile
5/7
Diversification profile
2/5
Positions
-
SC Schwab U.S. Large-Cap Growth ETF
SCHG - US8085243009 60.00% -
SC Schwab U.S. Large-Cap Value ETF
SCHV - US8085244098 40.00%
This portfolio consists of two ETFs: Schwab U.S. Large-Cap Growth ETF (60%) and Schwab U.S. Large-Cap Value ETF (40%). Such a composition is heavily concentrated in large-cap U.S. equities, which can lead to higher volatility compared to more diversified portfolios. While large-cap stocks are often considered stable, the lack of diversification across asset classes could expose the portfolio to sector-specific risks. To mitigate this, consider including different asset classes like bonds or international equities to balance the risk.
Growth
Historically, this portfolio has delivered a robust CAGR of 15.88%, indicating strong growth over time. However, it experienced a significant max drawdown of -33.94%, reflecting its vulnerability to market downturns. This performance suggests that while the portfolio has potential for high returns, it can also be quite volatile. Comparing this to common benchmarks, the growth rate is impressive, but the risk factor is notable. Diversifying could help reduce such drawdowns without significantly compromising returns.
Projection
Using a Monte Carlo simulation, which models potential future outcomes based on historical data, the portfolio's projected annualized return is 16.54%. This suggests continued strong performance, with a median projected growth of 618.84%. However, it's important to note that such simulations rely on past data and may not predict future results accurately. To enhance predictability, consider adjusting the asset mix to include more stable investments, which could provide a cushion during market volatility.
Asset classes
- Stocks 100%
The portfolio is almost entirely composed of stocks (99.86%), with a negligible cash position (0.14%). This heavy stock allocation suggests a focus on growth, but it lacks the diversification benefits that other asset classes, like bonds or real estate, might provide. Compared to a balanced portfolio, this one is more prone to equity market fluctuations. Introducing other asset classes could enhance stability and potentially improve the risk-adjusted returns, making the portfolio more resilient in various market conditions.
Sectors
- Technology 33%
- Financials 13%
- Consumer Discretionary 12%
- Health Care 11%
- Telecommunications 9%
- Industrials 8%
- Consumer Staples 5%
- Energy 3%
- Utilities 2%
- Real Estate 2%
- Basic Materials 2%
The sector allocation is heavily skewed towards Technology (33.28%), followed by Financial Services and Consumer Cyclicals. Such concentration can lead to higher volatility, especially if these sectors face downturns. A more balanced sector approach, aligning closer to broader market benchmarks, could provide better risk management. Diversifying into underrepresented sectors like basic materials or utilities could help stabilize returns and reduce reliance on a few high-growth sectors.
Regions
- North America 99%
- Europe Developed 1%
Geographically, the portfolio is overwhelmingly concentrated in North America (99.32%), with minimal exposure to other regions. This lack of international diversification can increase vulnerability to regional economic downturns. By incorporating more global equities, the portfolio could benefit from growth opportunities in other markets and reduce regional risk. A more balanced geographic allocation would align better with global benchmarks and could enhance long-term growth potential.
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 be optimized using the Efficient Frontier, which seeks the best possible risk-return ratio for a given set of assets. This involves adjusting the weights of the existing ETFs to achieve a balance between risk and return. While the current allocation is growth-focused, exploring different weightings could potentially enhance returns without increasing risk. However, remember that optimizing for efficiency does not necessarily mean achieving maximum diversification or aligning with specific investment goals.
Dividends
- Schwab U.S. Large-Cap Growth ETF 0.40%
- Schwab U.S. Large-Cap Value ETF 2.80%
- Weighted yield (per year) 1.36%
The portfolio's overall dividend yield is 1.36%, with the Schwab U.S. Large-Cap Value ETF contributing a higher yield of 2.8% compared to the Growth ETF's 0.4%. Dividends can provide a steady income stream, which is particularly beneficial during market volatility. For investors seeking income, increasing the allocation to dividend-paying assets could enhance yield. However, it's essential to balance this with growth objectives, as high dividend yields often come with lower capital appreciation.
Ongoing product costs
- Schwab U.S. Large-Cap Growth ETF 0.04%
- Schwab U.S. Large-Cap Value ETF 0.04%
- Weighted costs total (per year) 0.04%
With a total expense ratio (TER) of 0.04%, the portfolio is cost-efficient, which is advantageous for long-term performance. Low costs mean more of your returns stay in your pocket, compounding over time. This is a strong point of the portfolio, as high fees can significantly erode returns. Maintaining this cost efficiency is crucial, and it's worth regularly reviewing to ensure that any changes in asset allocation do not lead to increased costs.
What next?
Ready to invest in this portfolio?
Select a broker that fits your needs and watch for low fees to maximize your returns.
Create your own report?
Join our community!
Compare your holdings
How much do the funds you hold actually overlap with the ones people weigh them against?
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