A growth-focused portfolio concentrated in U.S. large-cap stocks with limited diversification

Risk profile

  • Secure
    Speculative

The risk profile, derived from past market volatility, reflects the level of risk the portfolio is exposed to. This assessment helps align your investments with your financial goals and comfort with market fluctuations.

Diversification profile

  • Focused
    Diversified

The diversification assessment evaluates the spread of investments across asset classes, regions, and sectors. This ensures a balanced mix, reducing risk and maximizing returns by not concentrating in any single area.

What type of investor this portfolio is suitable for

Growth Investors

This portfolio suits an investor with a high-risk tolerance seeking aggressive growth and a long-term horizon. It heavily focuses on U.S. large-cap equities, ideal for those willing to accept volatility for potential high returns. The lack of diversification and high correlation between holdings suggest it's best for individuals comfortable with market fluctuations and who prioritize capital appreciation over income. This strategy aligns with investors aiming to maximize growth potential over decades.

Positions

  • Schwab U.S. Large-Cap Growth ETF
    SCHG - US8085243009
    50.00%
  • Vanguard S&P 500 ETF
    VOO - US9229083632
    50.00%

The portfolio consists of two ETFs: Schwab U.S. Large-Cap Growth ETF and Vanguard S&P 500 ETF, each comprising 50% of the allocation. This results in a 100% equity exposure, heavily focused on large-cap U.S. stocks. Compared to a diversified benchmark, this portfolio lacks variety across asset classes and regions, which could increase risk. A more balanced portfolio might include bonds or international equities to reduce volatility and enhance diversification. This composition aligns with growth objectives but may not suit those seeking stability.

Growth Info

Historically, the portfolio has performed well, boasting a CAGR of 13.87%. A hypothetical $10,000 investment would grow significantly over time. However, it has experienced a maximum drawdown of -33.17%, indicating potential for substantial losses during market downturns. Comparing this to a benchmark, the performance is robust but comes with higher risk. Investors should weigh the impressive returns against the potential for significant volatility, especially if nearing retirement or needing liquidity.

Projection Info

Using a Monte Carlo simulation, which forecasts potential future outcomes based on historical data, the portfolio shows promising growth prospects. The median projection suggests a 440.8% return, with even the conservative 5th percentile indicating positive growth. However, it's essential to remember that past performance doesn't guarantee future results. While the simulation suggests a high probability of positive returns, market conditions can change. Investors should regularly review their allocations to ensure alignment with evolving financial goals and risk tolerance.

Asset classes Info

  • Stocks
    100%
  • Cash
    0%

With 100% allocation to stocks, the portfolio lacks exposure to other asset classes like bonds or real estate, which can provide stability and income. This single asset class focus might lead to increased volatility, especially during equity market downturns. A diversified portfolio typically includes a mix of asset classes to balance risk and return. Investors may consider adding fixed-income or alternative investments to reduce risk and enhance overall portfolio resilience.

Sectors Info

  • Technology
    39%
  • Telecommunications
    11%
  • Consumer Discretionary
    11%
  • Financials
    11%
  • Health Care
    11%
  • Industrials
    5%
  • Consumer Staples
    4%
  • Energy
    2%
  • Basic Materials
    2%
  • Utilities
    2%
  • Real Estate
    1%

The portfolio is heavily weighted towards technology, which accounts for 39% of the holdings. While this sector has driven recent growth, it is also prone to high volatility, especially during interest rate changes. Other sectors like healthcare and financial services provide some balance but are underrepresented. Aligning sector allocations more closely with a benchmark could improve diversification and mitigate sector-specific risks, especially during economic shifts that affect tech stocks.

Regions Info

  • North America
    100%
  • Europe Developed
    0%
  • Asia Developed
    0%

The portfolio's geographic exposure is entirely focused on North America, offering no international diversification. This concentration increases vulnerability to U.S.-specific economic changes. A more geographically diverse portfolio might include European or Asian equities, which can provide a hedge against domestic market fluctuations. Investors seeking to reduce geographic risk should consider adding international stocks to enhance global exposure and potentially capture growth in other regions.

Market capitalization Info

  • Mega-cap
    55%
  • Large-cap
    28%
  • Mid-cap
    15%
  • Small-cap
    1%

The portfolio is predominantly invested in mega-cap stocks, making up 55% of the allocation. While these companies are generally stable and offer growth potential, the lack of small-cap exposure limits opportunities for higher returns from emerging companies. A balanced market capitalization approach might include a mix of small, medium, and large-cap stocks, offering a blend of stability and growth potential. Investors could diversify by incorporating smaller-cap stocks to capture potential high-growth opportunities.

Redundant positions Info

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

The portfolio's assets are highly correlated, meaning they tend to move in the same direction. This limits diversification benefits, as both ETFs track similar indices. During market downturns, the lack of uncorrelated assets could lead to amplified losses. To improve diversification, consider incorporating assets with low correlation to U.S. large-cap equities, such as bonds or international stocks. This strategy can help mitigate risk and smooth returns over time.

Dividends Info

  • Schwab U.S. Large-Cap Growth ETF 0.50%
  • Vanguard S&P 500 ETF 1.50%
  • Weighted yield (per year) 1.00%

The portfolio's dividend yield is modest, with a total yield of 1.00%. While dividends contribute to returns, they are not a significant focus for this growth-oriented portfolio. Investors seeking income may need to adjust their strategy, potentially incorporating higher-yielding assets. However, for those prioritizing capital appreciation, this yield aligns with growth objectives. It's important to balance income needs with growth goals, especially as financial circumstances evolve.

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) 0.04%

The portfolio's costs are commendably low, with a total expense ratio of 0.04%. This is advantageous for long-term performance, as lower fees mean more money stays invested. Compared to industry averages, these costs are highly competitive, supporting better net returns over time. Investors should regularly review costs to ensure they remain low, as even small fee increases can erode returns. Maintaining a cost-effective strategy is crucial for maximizing long-term growth.

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.

The current asset allocation could be optimized for a better risk-return balance using the Efficient Frontier, which identifies the best possible returns for a given level of risk. However, the high correlation between assets suggests limited diversification. Before optimizing, consider diversifying by adding less correlated assets. This approach can enhance the portfolio's efficiency, aligning with growth objectives while managing risk. Optimization should be ongoing, reflecting changes in market conditions and personal financial goals.

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