A growth-oriented portfolio heavily invested in large-cap US equities with a strong tech focus

Risk profile

  • Secure
    Speculative

The risk profile, derived from past market volatility, reflects the level of risk the portfolio is exposed to. This assessment helps align your investments with your financial goals and comfort with market fluctuations.

Diversification profile

  • Focused
    Diversified

The diversification assessment evaluates the spread of investments across asset classes, regions, and sectors. This ensures a balanced mix, reducing risk and maximizing returns by not concentrating in any single area.

What type of investor this portfolio is suitable for

Growth Investors

This portfolio suits an investor with a growth-oriented profile, comfortable with higher volatility and focused on long-term capital appreciation. The ideal investor has a moderate to high risk tolerance, able to weather significant market fluctuations for the potential of above-average returns. A long-term investment horizon is crucial, as the portfolio's sector and asset concentration may lead to short-term underperformance relative to more diversified portfolios.

Positions

  • Invesco S&P 500® Momentum ETF
    SPMO - US46138E3392
    40.00%
  • Vanguard S&P 500 ETF
    VOO - US9229083632
    40.00%
  • Schwab U.S. Large-Cap Growth ETF
    SCHG - US8085243009
    20.00%

This portfolio is composed entirely of ETFs, with significant allocations to the Invesco S&P 500® Momentum ETF and Vanguard S&P 500 ETF at 40% each, and the Schwab U.S. Large-Cap Growth ETF making up the remaining 20%. This allocation demonstrates a clear growth orientation, focusing on large-cap US equities. The heavy weighting towards just three ETFs, all tracking large-cap stocks, indicates low diversification across asset classes and a high degree of overlap, particularly between the two S&P 500 ETFs.

Growth Info

With a Compound Annual Growth Rate (CAGR) of 20.26% and a maximum drawdown of -32.40%, the portfolio has shown strong growth potential but also significant volatility. The days contributing to 90% of returns being limited to 38 indicates that the portfolio’s performance is highly concentrated in short periods of high returns. This pattern underscores the growth orientation but also highlights the risk associated with timing the market.

Projection Info

The Monte Carlo simulation, projecting future performance based on historical data, suggests a wide range of outcomes with a 5th percentile at 273.1% growth and a 50th percentile at 1,251.3%. While the high number of simulations with positive returns (998 out of 1,000) is encouraging, it's important to remember that these projections are not guarantees. They illustrate potential volatility and the importance of maintaining a long-term perspective.

Asset classes Info

  • Stocks
    100%
  • Cash
    0%

The portfolio's allocation is exclusively in stocks, providing no asset class diversification. While stocks are known for their growth potential, the absence of bonds, real estate, or alternative investments leaves the portfolio exposed to higher volatility and sector-specific downturns. Diversifying across different asset classes can mitigate some of this risk.

Sectors Info

  • Technology
    38%
  • Financials
    14%
  • Telecommunications
    13%
  • Consumer Discretionary
    9%
  • Industrials
    8%
  • Health Care
    6%
  • Consumer Staples
    5%
  • Utilities
    2%
  • Energy
    2%
  • Real Estate
    1%
  • Basic Materials
    1%

The sectoral allocation is heavily weighted towards technology at 38%, followed by financial services and communication services. This tech-heavy focus aligns with a growth strategy but also increases susceptibility to sector-specific risks. The underrepresentation of sectors like real estate and basic materials further emphasizes the portfolio’s lack of diversification.

Regions Info

  • North America
    100%
  • Europe Developed
    0%
  • Asia Developed
    0%

Geographic allocation is entirely focused on North America, with no exposure to developed European or Asian markets, nor emerging markets. This concentration in a single region can amplify risks related to geopolitical events or economic downturns in the US. Expanding geographic exposure could provide a buffer against such risks.

Market capitalization Info

  • Mega-cap
    50%
  • Large-cap
    34%
  • Mid-cap
    15%
  • Small-cap
    1%

The portfolio's market capitalization breakdown shows a strong preference for mega and big-cap stocks, which is typical for growth-oriented investors seeking stability and potential for large gains. However, the minimal exposure to small-cap stocks limits opportunities for outsized returns from faster-growing companies.

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 the Schwab U.S. Large-Cap Growth ETF indicates overlapping investments that do not contribute to portfolio diversification. This redundancy suggests an opportunity to reallocate funds to less correlated assets, potentially improving the portfolio's risk-adjusted returns.

Dividends Info

  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • Invesco S&P 500® Momentum ETF 0.60%
  • Vanguard S&P 500 ETF 1.10%
  • Weighted yield (per year) 0.76%

The dividend yields, while not the primary focus of a growth strategy, contribute to the portfolio’s total return. The overall yield of 0.76% is modest but aligns with the growth orientation of the portfolio. Investors seeking income in addition to growth might consider assets with higher dividend yields.

Ongoing product costs Info

  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • Invesco S&P 500® Momentum ETF 0.13%
  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.07%

The portfolio's total expense ratio (TER) of 0.07% is impressively low, minimizing the drag on returns due to costs. This efficiency is a strength, particularly for a growth-focused portfolio where maximizing compounding is crucial.

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.

To optimize the portfolio towards the Efficient Frontier, reducing the overlap between highly correlated assets is key. This involves reassessing the allocation to the Vanguard and Invesco ETFs, considering their significant overlap. Diversifying into less correlated assets or sectors could enhance the portfolio's risk-return profile without necessarily sacrificing growth potential.

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