A growth-focused portfolio with limited diversification and high exposure to North American equities

Report created on Dec 28, 2024

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

The portfolio is heavily concentrated in three funds, with the Schwab Total Stock Market Index Fund holding the largest share at 40.14%. The T. Rowe Price New America Growth Fund follows closely at 38.92%, while the Schwab S&P 500 Index Fund makes up the remaining 20.94%. This composition aligns with a growth profile, focusing predominantly on U.S. equities. Compared to common benchmarks, this portfolio shows low diversification, as it relies heavily on a limited number of funds. To enhance diversification, consider integrating additional asset classes or funds that target different markets or sectors.

Growth Info

Historically, this portfolio has performed well, with a Compound Annual Growth Rate (CAGR) of 11.48%. This is a strong performance, especially when compared to typical market benchmarks. However, the max drawdown of -33.17% indicates vulnerability during market downturns. This historical data suggests that while the portfolio has potential for high returns, it also carries significant risk. Remember, past performance does not guarantee future results, so it's essential to weigh these returns against your risk tolerance.

Projection Info

Forward projections using Monte Carlo simulations, which estimate potential outcomes based on historical data, indicate varied future performance. With 1,000 simulations, the portfolio's annualized return is 12.64%, with a 50th percentile end value of 309.31%. While simulations suggest positive outcomes, they are based on historical trends and cannot predict future certainty. Consider these projections as a guide, but remain aware of potential market changes that could affect actual performance.

Asset classes Info

  • Stocks
    99%
  • Cash
    1%

The portfolio is overwhelmingly invested in stocks, accounting for 98.81% of the allocation. This heavy stock focus aligns with a growth-oriented strategy but limits diversification. The minimal presence of other asset classes, such as bonds or cash, can increase volatility. Examining common benchmarks, a more balanced allocation might include a mix of stocks, bonds, and alternative assets. Diversifying across asset classes can help manage risk and provide more stable returns over time.

Sectors Info

  • Technology
    32%
  • Financials
    12%
  • Health Care
    12%
  • Consumer Discretionary
    11%
  • Telecommunications
    9%
  • Industrials
    9%
  • Consumer Staples
    4%
  • Energy
    3%
  • Basic Materials
    3%
  • Utilities
    2%
  • Real Estate
    2%

Sector allocation shows a significant concentration in technology, making up 31.95% of the portfolio. While this can drive growth, it also exposes the portfolio to sector-specific risks, such as regulatory changes or tech market downturns. The allocation across other sectors like financial services and healthcare is more balanced. To mitigate risk, consider diversifying further by reducing technology exposure and increasing investments in underrepresented sectors.

Regions Info

  • North America
    97%
  • Europe Developed
    2%
  • Asia Developed
    1%

Geographically, the portfolio is heavily weighted towards North America, with 97.26% of assets. This concentration limits exposure to global markets and the diversification benefits they offer. Compared to benchmarks, this is significantly overexposed to a single region. To enhance geographic diversification, consider adding investments in developed and emerging markets outside North America. This can help balance the portfolio and reduce region-specific risks.

Redundant positions Info

  • Schwab S&P 500 Index Fund
    SCHWAB TOTAL STOCK MARKET INDEX FUND SELECT SHARES
    High correlation

The portfolio includes highly correlated assets, particularly the Schwab S&P 500 Index Fund and the Schwab Total Stock Market Index Fund. High correlation means these assets tend to move together, which can limit diversification benefits during market downturns. By reducing holdings in correlated assets and adding those with lower correlation, you can achieve better risk management. Consider integrating funds that track different indices or asset classes to enhance diversification.

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 identifies the best risk-return ratio based on current assets. However, this requires addressing the high correlation between existing funds, as overlapping assets limit diversification benefits. An optimized portfolio could achieve a higher expected return of 13.83% with a similar risk level. Consider rebalancing by adding uncorrelated assets to improve efficiency and align with your risk tolerance.

Dividends Info

  • Schwab S&P 500 Index Fund 1.20%
  • Weighted yield (per year) 0.25%

The portfolio's dividend yield is relatively low at 0.25%, reflecting its growth focus. Dividends can provide a steady income stream, beneficial for those seeking regular cash flow. If income generation is a goal, consider incorporating funds or stocks with higher dividend yields. Balancing growth and income can enhance portfolio stability and provide cash flow without compromising growth potential.

Ongoing product costs Info

  • T. ROWE PRICE NEW AMERICA GROWTH FUND T. ROWE PRICE NEW AMERICA GROWTH FUND 0.79%
  • Schwab S&P 500 Index Fund 0.02%
  • SCHWAB TOTAL STOCK MARKET INDEX FUND SELECT SHARES 0.03%
  • Weighted costs total (per year) 0.32%

Portfolio costs are moderate, with a total expense ratio (TER) of 0.32%. The Schwab S&P 500 Index Fund offers the lowest cost at 0.02%, while the T. Rowe Price New America Growth Fund is higher at 0.79%. Lowering costs can significantly improve long-term returns. Evaluate whether lower-cost alternatives are available that provide similar exposure. Reducing fees can enhance net returns, contributing to the portfolio's overall performance.

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