Moderately diversified growth portfolio with strong US focus and high correlation among key assets

Report created on Jan 10, 2025

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

This portfolio is composed primarily of large-cap US equities, with ETFs like Vanguard S&P 500 and Vanguard Total Stock Market Index Fund making up over 67% of the total. The inclusion of individual stocks such as Alphabet and PayPal adds a layer of concentration in tech-heavy assets. The bond allocation is minimal at under 5%, indicating a growth-oriented strategy. Compared to a typical balanced portfolio, this one is more equity-heavy, which can lead to higher returns but also increased volatility. To balance risk and return, consider adding more bonds or alternative assets.

Growth Info

Historically, this portfolio has delivered a Compound Annual Growth Rate (CAGR) of 15.04%, which is impressive. However, it also experienced a maximum drawdown of -32.11%, highlighting significant risk during downturns. This performance suggests a strong growth potential but with notable volatility. When compared to a benchmark like the S&P 500, the portfolio's returns are competitive, yet the drawdown indicates a need for improved risk management. Consider diversifying further to mitigate potential losses in future downturns.

Projection Info

The Monte Carlo simulation, which uses historical data to predict future outcomes, shows a range of potential portfolio returns. With a median projected return of 333.88% and a 5th percentile loss of -40.42%, the model highlights both growth potential and risk. Keep in mind that simulations are based on past data and do not guarantee future performance. To improve future outcomes, consider reducing asset correlation and increasing exposure to less volatile investments.

Asset classes Info

  • Stocks
    95%
  • Bonds
    5%

The portfolio is heavily weighted towards stocks, comprising over 95% of the allocation, with a small portion in bonds. This skew towards equities aligns with a growth-focused strategy but limits diversification benefits. A more balanced allocation, including bonds and alternative assets, could reduce volatility and improve stability. Compared to typical benchmarks, the portfolio lacks sufficient fixed-income exposure, which could be addressed by increasing bond investments.

Sectors Info

  • Technology
    22%
  • Telecommunications
    16%
  • Consumer Discretionary
    15%
  • Financials
    14%
  • Consumer Staples
    8%
  • Health Care
    8%
  • Industrials
    5%
  • Energy
    2%
  • Utilities
    2%
  • Real Estate
    2%
  • Basic Materials
    1%

Sector allocation reveals a significant concentration in technology and communication services, which together account for over 38% of the portfolio. This focus can lead to higher volatility, especially during tech market corrections. Compared to a diversified benchmark, the portfolio is underweight in defensive sectors like utilities and healthcare. To reduce risk, consider reallocating some assets to more stable sectors that can provide a buffer during market downturns.

Regions Info

  • North America
    93%
  • Europe Developed
    2%

The portfolio is predominantly invested in North American assets, with over 92% exposure, limiting geographic diversification. This can increase vulnerability to US market-specific risks. Compared to global benchmarks, there's minimal exposure to emerging markets and developed regions outside North America. To enhance diversification, consider increasing allocations to international markets, which can provide growth opportunities and reduce regional risk.

Redundant positions Info

  • Vanguard Total Stock Market Index Fund ETF Shares
    Vanguard S&P 500 ETF
    High correlation

The portfolio shows high correlation between key assets, particularly among the Vanguard ETFs, which both track US equities. High asset correlation can limit diversification benefits and increase risk during market downturns. To improve diversification, consider replacing some correlated assets with those that have low correlation to the current holdings. This can help stabilize returns and reduce overall portfolio risk.

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 using the Efficient Frontier, which suggests the best risk-return ratio based on current assets. However, the high correlation between key holdings limits diversification, reducing potential efficiency. To optimize further, consider adjusting allocations between existing assets to achieve a better balance. Remember, efficiency here focuses on maximizing returns for a given level of risk, not necessarily diversification or other objectives.

Dividends Info

  • Vanguard Total Bond Market Index Fund ETF Shares 3.70%
  • British American Tobacco p.l.c. 6.10%
  • The Cheesecake Factory 2.20%
  • Dollar General Corporation 2.50%
  • Walt Disney Company 0.40%
  • Alphabet Inc Class A 0.30%
  • Micron Technology Inc 0.30%
  • Nike Inc 2.10%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Weighted yield (per year) 1.31%

The portfolio's dividend yield stands at 1.31%, with significant contributions from the Vanguard Total Bond Market ETF and British American Tobacco. While dividends provide a steady income stream, the overall yield is modest due to the growth focus. For investors seeking higher income, consider increasing allocations to high-dividend stocks or funds. However, ensure that this aligns with your long-term growth objectives.

Ongoing product costs Info

  • Vanguard Total Bond Market Index Fund ETF Shares 0.03%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Weighted costs total (per year) 0.02%

The portfolio benefits from impressively low costs, with a Total Expense Ratio (TER) of 0.02%. Low costs are crucial for enhancing long-term returns, as they reduce the drag on performance. This aligns well with best practices in cost management. To maintain this advantage, continue monitoring fees and consider replacing any high-cost assets with more cost-effective alternatives, ensuring that the overall strategy remains aligned with your goals.

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