A balanced but concentrated portfolio with a strong focus on U.S. large-cap equities

Report created on Feb 12, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

The portfolio is structured with two main ETFs each holding 40%: Schwab U.S. Dividend Equity and Vanguard S&P 500, alongside a 20% allocation to Schwab U.S. Large-Cap Growth. This composition heavily leans towards large-cap U.S. equities, reflecting a balanced but concentrated approach. Compared to a diversified benchmark, this portfolio lacks variety in asset types, which may limit its ability to mitigate risks through diversification. To improve, consider introducing different asset classes such as bonds or international equities to enhance diversification and potentially reduce volatility.

Growth Info

Historically, the portfolio has shown a strong Compound Annual Growth Rate (CAGR) of 13.85%, outperforming many benchmarks. However, it experienced a significant maximum drawdown of -33.17%, indicating vulnerability during market downturns. This performance pattern suggests that while the portfolio can deliver impressive returns, it is also susceptible to market volatility. To balance this, consider strategies that can cushion against downturns, such as incorporating more defensive assets or diversifying into less correlated sectors and regions.

Projection Info

Using Monte Carlo simulations, which project possible future outcomes based on historical data, the portfolio shows promising potential. With 998 out of 1,000 simulations yielding positive returns and an annualized return of 15.64%, the outlook is optimistic. However, it's crucial to remember that these projections are not guarantees, as they rely on past data and assumptions. To maintain a positive trajectory, regularly review the portfolio’s alignment with your risk tolerance and market conditions, adjusting as necessary to stay on track.

Asset classes Info

  • Stocks
    100%

The portfolio is 100% invested in stocks, with no allocation to other asset classes such as bonds or cash. This singular focus on equities can lead to higher potential returns but also increases exposure to market volatility. Diversification across different asset classes typically helps in managing risk, as different assets often perform differently under various market conditions. To enhance diversification, consider adding fixed-income securities or alternative investments, which could provide stability and reduce overall portfolio risk.

Sectors Info

  • Technology
    27%
  • Financials
    14%
  • Health Care
    13%
  • Consumer Discretionary
    11%
  • Industrials
    8%
  • Consumer Staples
    8%
  • Telecommunications
    8%
  • Energy
    7%
  • Basic Materials
    2%
  • Utilities
    1%
  • Real Estate
    1%

The portfolio is heavily weighted towards technology at 27%, followed by financial services and healthcare. This sector allocation mirrors some common benchmarks but shows a significant tilt towards tech, which can lead to higher volatility, especially during interest rate changes. While tech has been a strong performer, it's wise to ensure sector balance to mitigate risks associated with sector-specific downturns. Consider gradually shifting some investments to underrepresented sectors like utilities or real estate for a more balanced sector exposure.

Regions Info

  • North America
    99%

With 99% of assets in North America, this portfolio is highly concentrated geographically, potentially missing out on growth opportunities in other regions. This concentration also increases vulnerability to U.S. market-specific risks. A more geographically diversified portfolio can provide exposure to different economic cycles and reduce reliance on one market. Consider introducing assets from developed and emerging markets to capture broader growth and enhance resilience against regional downturns.

Market capitalization Info

  • Large-cap
    44%
  • Mega-cap
    32%
  • Mid-cap
    21%
  • Small-cap
    3%
  • Micro-cap
    1%

The portfolio's market capitalization is primarily in big and mega-cap stocks, comprising 76% of the total. This focus on larger companies typically offers stability and lower volatility but may limit growth potential compared to smaller-cap stocks. While large caps are often reliable, incorporating a mix of small and mid-cap stocks can provide growth opportunities and better diversification. This approach can help balance the portfolio by introducing companies that may grow faster than their larger counterparts.

Redundant positions Info

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

The high correlation between the Vanguard S&P 500 ETF and Schwab U.S. Large-Cap Growth ETF suggests limited diversification benefits. Highly correlated assets tend to move together, which can amplify losses during downturns. To achieve better risk management, consider introducing assets with lower correlation, such as international stocks or bonds. This can help smooth out returns and reduce overall portfolio volatility, providing a more stable investment experience.

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 potentially be optimized using the Efficient Frontier, which helps identify the best risk-return ratio based on current assets. However, the high correlation between some assets suggests a need for diversification before optimization. By reducing overlap and introducing less correlated assets, the portfolio's efficiency can be enhanced. This approach aims to achieve higher returns for a given level of risk, ensuring a more resilient and balanced investment strategy.

Dividends Info

  • Schwab U.S. Dividend Equity ETF 3.60%
  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • Vanguard S&P 500 ETF 1.20%
  • Weighted yield (per year) 2.00%

The portfolio boasts a total dividend yield of 2.00%, with the Schwab U.S. Dividend Equity ETF contributing significantly at 3.60%. Dividends can provide a steady income stream and cushion against market volatility. For investors seeking income, maintaining or increasing the dividend yield can be beneficial. However, ensure the portfolio remains balanced between income and growth by periodically reviewing dividend contributions and adjusting allocations as needed to align with changing financial goals.

Ongoing product costs Info

  • Schwab U.S. Dividend Equity ETF 0.06%
  • 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 overall Total Expense Ratio (TER) is impressively low at 0.04%, which is advantageous for long-term performance. Lower costs mean more of your returns stay in your pocket, compounding over time. This cost efficiency aligns well with best practices in portfolio management. Continue monitoring expense ratios to ensure they remain competitive, and consider using cost-effective funds in any future rebalancing to maintain this advantage.

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