A growth-focused portfolio with a strong U.S. equity bias and moderate diversification

Report created on Apr 21, 2025

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

The portfolio is heavily weighted towards U.S. large-cap growth stocks, which make up 50% of the allocation. This is complemented by U.S. dividend equities and international stocks, each holding 15%. The remaining 20% is split between U.S. small-cap and mid-cap ETFs. This composition leans heavily on equities, reflecting a growth-focused strategy. Compared to a balanced benchmark, this portfolio is less diversified across asset classes, as it lacks bonds or alternative investments. To enhance diversification, consider integrating fixed-income or alternative assets to mitigate risk during market downturns.

Growth Info

The portfolio's historical performance is impressive, with a Compound Annual Growth Rate (CAGR) of 12.26%. However, it's important to note the significant maximum drawdown of -34.24%, indicating vulnerability during market declines. This performance is in line with growth-focused portfolios, which typically show higher volatility. When comparing to a benchmark, the portfolio's returns are competitive but come with increased risk. To manage this risk, consider diversifying across additional asset classes or sectors that may offer more stability during volatile periods.

Projection Info

Monte Carlo simulations, which use historical data to project future outcomes, suggest a wide range of potential returns. With a median projection of 239.2% and a 67th percentile of 383.5%, the portfolio has strong growth potential. However, the 5th percentile predicts a -9.0% return, highlighting the risk of negative outcomes. These projections underscore the importance of diversification and risk management. While historical data informs these simulations, they cannot guarantee future performance. Regularly reviewing and adjusting the portfolio to align with changing market conditions can help manage potential risks.

Asset classes Info

  • Stocks
    100%

The portfolio is solely invested in stocks, lacking exposure to bonds or other asset classes. This 100% equity allocation aligns with growth objectives but limits diversification. Compared to diversified benchmarks, this portfolio may experience higher volatility, especially during market downturns. Introducing bonds or other asset classes could provide a buffer against equity market fluctuations and enhance risk-adjusted returns. Consider gradually incorporating fixed-income or alternative investments to achieve a more balanced risk profile without sacrificing growth potential.

Sectors Info

  • Technology
    29%
  • Financials
    12%
  • Health Care
    12%
  • Consumer Discretionary
    10%
  • Industrials
    10%
  • Telecommunications
    9%
  • Consumer Staples
    6%
  • Energy
    5%
  • Basic Materials
    3%
  • Real Estate
    2%
  • Utilities
    1%
  • Consumer Discretionary
    1%

The portfolio's sector allocation is tech-heavy, with technology stocks comprising 29%. Other significant sectors include financial services and healthcare, each at 12%. This concentration in technology aligns with growth strategies but may lead to increased volatility, especially during interest rate hikes. Compared to sector benchmarks, the portfolio is well-diversified across various industries, though it could benefit from a more balanced approach. Consider reviewing sector allocations to ensure alignment with long-term goals and to mitigate risks associated with sector-specific downturns.

Regions Info

  • North America
    85%
  • Europe Developed
    10%
  • Japan
    3%
  • Australasia
    1%
  • Asia Developed
    1%

The portfolio is predominantly focused on North America, with 85% exposure, limiting geographic diversification. While this aligns with a U.S.-centric growth strategy, it may miss potential opportunities in emerging markets or other regions. Compared to global benchmarks, the portfolio is underexposed to Europe, Japan, and other international markets. To enhance geographic diversification, consider gradually increasing exposure to non-U.S. equities, particularly in regions with strong growth prospects. This can help mitigate risks associated with regional economic downturns and capture global growth opportunities.

Market capitalization Info

  • Mega-cap
    41%
  • Large-cap
    25%
  • Mid-cap
    17%
  • Small-cap
    14%
  • Micro-cap
    3%

The portfolio is well-diversified across market capitalizations, with 41% in mega-cap stocks and 25% in big caps. Medium and small caps account for 17% and 14%, respectively, while micro-caps make up just 3%. This distribution aligns with a growth strategy, offering exposure to both established and emerging companies. Compared to market cap benchmarks, the portfolio is balanced, though it leans slightly towards larger companies. To optimize growth and risk, consider adjusting allocations to ensure a balanced mix of market caps, capturing both stability and potential high-growth opportunities.

Redundant positions Info

  • Schwab U.S. Mid-Cap ETF
    Schwab U.S. Small-Cap ETF
    High correlation

Highly correlated assets, such as the Schwab U.S. Mid-Cap ETF and Schwab U.S. Small-Cap ETF, suggest limited diversification benefits. When assets move together, the portfolio's risk is not effectively spread, especially during market downturns. This correlation indicates a need for greater diversification across uncorrelated assets. By reducing exposure to overlapping investments and introducing assets with different risk-return profiles, the portfolio can achieve better diversification, potentially enhancing risk-adjusted returns and reducing vulnerability to market volatility.

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 benefit from optimization using the Efficient Frontier, which seeks the best risk-return ratio. However, the presence of highly correlated assets limits diversification benefits. Before optimization, consider reducing exposure to overlapping investments and introducing uncorrelated assets. This adjustment can enhance diversification, potentially improving the portfolio's position on the Efficient Frontier. While efficiency focuses on risk-return balance, it doesn't guarantee diversification or other specific goals. Regularly reassessing allocations and incorporating new insights can help maintain an optimized portfolio aligned with evolving market conditions.

Dividends Info

  • Schwab U.S. Small-Cap ETF 1.50%
  • Schwab U.S. Dividend Equity ETF 4.10%
  • Schwab U.S. Large-Cap Growth ETF 0.50%
  • Schwab U.S. Mid-Cap ETF 1.60%
  • SCHWAB INTERNATIONAL INDEX FUND SELECT SHARES 3.10%
  • Weighted yield (per year) 1.64%

The portfolio's dividend yield is 1.64%, with the Schwab U.S. Dividend Equity ETF contributing significantly at 4.10%. While dividends provide a steady income stream, the focus on growth stocks limits overall yield. For growth-focused investors, dividends may be less critical, but they can enhance total returns and provide stability during market downturns. To balance growth and income, consider selectively increasing exposure to dividend-paying stocks or funds. This approach can provide a cushion during volatile periods without detracting from the growth potential of the portfolio.

Ongoing product costs Info

  • Schwab U.S. Small-Cap ETF 0.04%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • Schwab U.S. Mid-Cap ETF 0.04%
  • Weighted costs total (per year) 0.04%

The portfolio's costs are impressively low, with a Total Expense Ratio (TER) of 0.04%. This cost efficiency supports better long-term performance by minimizing the impact of fees on returns. Compared to industry averages, these costs are highly competitive, enhancing the portfolio's appeal. Maintaining low costs is crucial for maximizing net returns, especially over extended investment horizons. Regularly reviewing and optimizing fees can ensure continued cost efficiency. While costs are well-managed, it's essential to balance them with other factors like diversification and risk management to achieve optimal portfolio performance.

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