A growth-focused portfolio with limited diversification and high correlation among assets

Report created on Mar 26, 2025

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 weighted towards growth-oriented assets, with a significant portion in ETFs like the Vanguard S&P 500 Growth Index Fund and Vanguard Growth Index Fund. These ETFs, along with individual stocks like Coupang LLC and Walt Disney Company, make up the bulk of the portfolio. This composition leans heavily on equities, lacking diversification into other asset classes like bonds or real estate. While this structure may align with growth objectives, it also exposes the portfolio to higher volatility. To improve diversification, consider incorporating a mix of asset classes that can provide stability during market downturns.

Growth Info

Historically, the portfolio has achieved a CAGR of 4.56%, which is modest for a growth-focused strategy. The maximum drawdown of -35.63% indicates significant volatility, reflecting the portfolio's high equity concentration. This performance is below typical growth benchmarks, suggesting room for improvement. While past performance does not predict future returns, analyzing past trends can guide adjustments. To enhance performance, consider rebalancing towards a more diversified mix that may offer better risk-adjusted returns.

Projection Info

The Monte Carlo simulation, a tool that uses historical data to project potential future outcomes, suggests a wide range of possible returns. The median projection is a 15.3% return, but outcomes vary significantly, with some scenarios predicting substantial losses. While 561 out of 1,000 simulations showed positive returns, the high variability underscores the portfolio's risk. These projections highlight the uncertainty inherent in relying solely on equities. To better manage risk, consider adjusting the asset mix to include more stable investments.

Asset classes Info

  • Stocks
    100%

The portfolio is exclusively composed of stocks, lacking exposure to other asset classes like bonds or commodities. This singular focus can lead to greater volatility, as equities tend to react similarly to market changes. Diversifying into different asset classes could reduce risk and provide more consistent returns. A more balanced allocation might include bonds for stability or commodities for inflation protection, offering a buffer against market swings.

Sectors Info

  • Consumer Discretionary
    27%
  • Telecommunications
    26%
  • Technology
    19%
  • Financials
    18%
  • Health Care
    3%
  • Industrials
    3%
  • Consumer Staples
    2%
  • Energy
    1%
  • Utilities
    1%
  • Real Estate
    1%

The portfolio is concentrated in consumer cyclicals and communication services, making up over half of the total allocation. This sector concentration could lead to increased risk, particularly if these industries face headwinds. While technology and financial services are also significant, the lack of exposure to defensive sectors like healthcare or utilities may limit resilience during economic downturns. Balancing sector exposure can mitigate sector-specific risks and enhance stability.

Regions Info

  • North America
    100%

With 100% of assets allocated to North America, the portfolio lacks geographic diversification. This concentration exposes it to regional economic and political risks. Expanding into international markets, including developed and emerging economies, could provide diversification benefits and reduce reliance on the U.S. market. A more globally diversified portfolio may capture growth opportunities abroad and mitigate regional downturns.

Market capitalization Info

  • Large-cap
    66%
  • Mega-cap
    28%
  • Mid-cap
    6%

The portfolio skews towards large-cap stocks, with 66% in big-cap and 28% in mega-cap companies. While these stocks are generally more stable, the lack of mid-cap and small-cap exposure may limit growth potential. Smaller companies often offer higher growth prospects, albeit with increased risk. Balancing market capitalization exposure can enhance growth opportunities while maintaining stability.

Redundant positions Info

  • Vanguard S&P 500 Growth Index Fund ETF Shares
    Vanguard Growth Index Fund ETF Shares
    High correlation

The portfolio contains highly correlated assets, particularly between the Vanguard S&P 500 Growth Index Fund and Vanguard Growth Index Fund. High correlation means these assets tend to move together, reducing diversification benefits. In market downturns, this can lead to amplified losses. To improve diversification, consider replacing some correlated assets with those that have a lower correlation, thereby reducing 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 current portfolio can be optimized using the Efficient Frontier, which helps identify the best risk-return ratio. By adjusting the allocation among existing assets, the portfolio could achieve an expected return of 11.03% at a risk level of 14.01%. This optimization suggests that reallocating within existing holdings can enhance returns without increasing risk. However, this approach focuses solely on asset allocation and does not address diversification across asset classes or regions.

Dividends Info

  • Walt Disney Company 0.90%
  • Charles Schwab Corp 1.30%
  • Vanguard S&P 500 Growth Index Fund ETF Shares 0.40%
  • Vanguard Growth Index Fund ETF Shares 0.40%
  • Vanguard High Dividend Yield Index Fund ETF Shares 2.90%
  • Weighted yield (per year) 0.61%

The portfolio's dividend yield is relatively low at 0.61%, reflecting its growth orientation. While growth stocks typically reinvest profits to fuel expansion, dividends can provide a steady income stream and reduce reliance on capital gains. Investors seeking income may consider adding higher-yielding stocks or funds to balance growth and income needs. This approach can enhance total returns and provide a buffer during market volatility.

Ongoing product costs Info

  • Vanguard S&P 500 Growth Index Fund ETF Shares 0.10%
  • Vanguard Growth Index Fund ETF Shares 0.04%
  • Vanguard High Dividend Yield Index Fund ETF Shares 0.06%
  • Weighted costs total (per year) 0.03%

The portfolio's total expense ratio (TER) is impressively low at 0.03%, thanks to the inclusion of cost-effective Vanguard ETFs. Low costs are crucial for long-term performance, as they allow more of the returns to compound over time. This efficient cost structure is a positive aspect, supporting better net returns. Maintaining a focus on cost-effective investments can help optimize returns without sacrificing quality.

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