A high-growth portfolio with concentrated exposure to large-cap tech stocks in North America

Report created on Feb 3, 2025

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

This portfolio is heavily weighted towards the Schwab U.S. Large-Cap Growth ETF, comprising 75% of the total allocation, with the remaining 25% in the Avantis® U.S. Small Cap Value ETF. This composition is heavily skewed towards large-cap growth stocks, which can provide substantial upside potential but also increase volatility. While the portfolio is classified as having low diversification, the two ETFs offer a mix of growth and value strategies that can complement each other. Consider diversifying further by adding different asset classes or sectors to reduce risk and enhance stability.

Growth Info

Historically, the portfolio has delivered impressive returns with a Compound Annual Growth Rate (CAGR) of 21.12%. However, it also experienced a significant maximum drawdown of -35.50%, highlighting the potential risk associated with its concentrated growth focus. Comparing this performance to a benchmark, such as the S&P 500, would provide additional context. While past performance is no guarantee of future results, the high returns indicate the portfolio's potential, but the volatility underscores the need for risk management strategies to protect against downturns.

Projection Info

Using Monte Carlo simulations, which involve running numerous scenarios to predict future outcomes based on historical data, the portfolio shows a wide range of potential future values. The median outcome suggests a strong growth trajectory, with a 50th percentile return of 1,017.3%. However, the 5th percentile projects a much lower return of 88.3%, indicating potential downside risk. While these projections can guide expectations, remember that they rely on historical data and assumptions, which may not fully capture future market conditions.

Asset classes Info

  • Stocks
    100%

The portfolio is exclusively allocated to equities, which can offer substantial growth potential but also increase exposure to market volatility. This 100% stock allocation aligns with a high-risk, high-reward investment strategy, suitable for those seeking aggressive growth. Compared to a diversified benchmark, this lack of asset class diversification may increase vulnerability to market downturns. Consider incorporating bonds or other asset classes to balance risk and potentially smooth out returns, especially if nearing a financial goal or requiring more stability.

Sectors Info

  • Technology
    39%
  • Consumer Discretionary
    14%
  • Financials
    12%
  • Telecommunications
    11%
  • Health Care
    8%
  • Industrials
    7%
  • Energy
    5%
  • Basic Materials
    3%
  • Consumer Staples
    2%

The portfolio is heavily concentrated in the technology sector, which accounts for 39% of the allocation. While this sector has driven significant growth in recent years, it is also susceptible to volatility, especially during interest rate hikes. Other sectors like consumer cyclicals and financial services provide some diversification but are still relatively minor. To mitigate sector-specific risks, consider reallocating some assets to underrepresented sectors like utilities or real estate, which may offer more stability and reduce overall portfolio risk.

Regions Info

  • North America
    99%

With 99% of the portfolio's geographic exposure in North America, it lacks international diversification. This heavy reliance on the North American market could expose the portfolio to region-specific risks, such as economic downturns or policy changes. Compared to global benchmarks, this concentration limits exposure to potential growth opportunities in emerging markets or other developed regions. Consider diversifying geographically to capture growth in other areas and reduce the impact of North American market fluctuations on the portfolio.

Market capitalization Info

  • Mega-cap
    51%
  • Large-cap
    15%
  • Small-cap
    14%
  • Micro-cap
    11%
  • Mid-cap
    9%

The portfolio is predominantly composed of mega and big-cap stocks, making up 66% of the allocation. This tilt towards larger companies can provide stability and lower volatility compared to smaller-cap stocks. However, the 14% allocation to small caps and 11% to micro caps offers growth potential, albeit with higher risk. Balancing market capitalizations can enhance diversification and provide a mix of stability and growth. Consider adjusting the allocation to medium and small-cap stocks to better capture potential growth opportunities.

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's current allocation may not lie on the Efficient Frontier, which represents the best possible risk-return trade-off for a given set of assets. By adjusting the weights of the existing ETFs, it's possible to find a more optimal balance that maximizes returns for a given level of risk. This optimization doesn't necessarily mean adding new assets but rather reallocating between the current holdings. Consider using portfolio optimization tools to explore potential adjustments, ensuring that risk and return are aligned with your investment goals.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.60%
  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • Weighted yield (per year) 0.70%

The portfolio's overall dividend yield is relatively low at 0.70%, with the Avantis® U.S. Small Cap Value ETF contributing more to this yield than the Schwab U.S. Large-Cap Growth ETF. While dividends can provide a steady income stream and enhance total returns, this portfolio is more focused on capital appreciation than income generation. If income is a priority, consider increasing exposure to dividend-paying stocks or funds. However, if growth remains the primary goal, the current allocation aligns well with that strategy.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • Weighted costs total (per year) 0.09%

The portfolio's total expense ratio (TER) is impressively low at 0.09%, with the Schwab U.S. Large-Cap Growth ETF contributing a minimal 0.04%. Keeping costs low is crucial for enhancing long-term returns, as high fees can erode gains over time. This cost efficiency is a strong positive for the portfolio, aligning with best practices for cost management. Continue to monitor and compare fees when considering new investments to maintain this advantage, ensuring that any additional costs are justified by potential returns.

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