High-Risk Growth Portfolio with Low Diversification

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 is suitable for aggressive investors who are focused on long-term capital appreciation and are willing to accept higher levels of risk. Such investors typically have a long investment horizon, allowing them to ride out market volatility. They are less concerned with regular income and more focused on achieving significant growth. Their risk tolerance is high, and they are comfortable with the potential for substantial fluctuations in portfolio value.

Positions

  • Vanguard S&P 500 ETF
    VOO - US9229083632
    50.00%
  • Vanguard Growth Index Fund ETF Shares
    VUG - US9229087369
    20.00%
  • Vanguard Small-Cap Index Fund ETF Shares
    VB - US9229087518
    10.00%
  • Vanguard Mid-Cap Index Fund ETF Shares
    VO - US9229086296
    10.00%
  • Vanguard Value Index Fund ETF Shares
    VTV - US9229087443
    10.00%

The portfolio is composed primarily of ETFs, with a significant allocation to the Vanguard S&P 500 ETF making up 50% of the total. Other notable holdings include the Vanguard Growth Index Fund ETF Shares at 20%, Vanguard Small-Cap Index Fund ETF Shares at 10%, Vanguard Mid-Cap Index Fund ETF Shares at 10%, and Vanguard Value Index Fund ETF Shares at 10%. This composition indicates a strong focus on growth-oriented investments, with a low level of diversification, concentrating heavily on the US stock market.

Growth

Historically, the portfolio has performed well, showing a compound annual growth rate (CAGR) of 12.66%. However, it has also experienced significant volatility, with a maximum drawdown of -34.82%. This means that while the portfolio has the potential for high returns, it is also susceptible to substantial losses. The fact that 90% of the returns come from just 30 days highlights the importance of staying invested and not trying to time the market.

Projection

Using a Monte Carlo simulation, which involves running thousands of hypothetical future scenarios, the portfolio shows a wide range of possible outcomes. Assuming a hypothetical initial investment, the 5th percentile outcome is a return of 47.04%, while the median (50th percentile) outcome is 412.49%, and the 67th percentile outcome is 587.51%. This suggests a high potential for significant gains, but also underscores the uncertainty and risk involved.

Asset classes

  • Stocks
    100%
  • Cash
    0%

The portfolio is heavily weighted towards stocks, with 99.68% allocated to equities and a negligible 0.32% in cash. This high concentration in stocks aligns with the growth objective but also increases the portfolio's risk. A more balanced allocation, including bonds or other asset classes, could help mitigate some of this risk and provide more stability during market downturns.

Sectors

  • Technology
    29%
  • Financials
    12%
  • Health Care
    12%
  • Consumer Discretionary
    11%
  • Industrials
    10%
  • Telecommunications
    8%
  • Consumer Staples
    5%
  • Energy
    4%
  • Real Estate
    3%
  • Basic Materials
    3%
  • Utilities
    3%

The sector allocation reveals a strong emphasis on Technology, which makes up 29.24% of the portfolio. Other significant sectors include Financial Services at 12.14%, Healthcare at 11.67%, and Consumer Cyclicals at 10.86%. While these sectors have strong growth potential, the heavy concentration in a few sectors increases the portfolio's vulnerability to sector-specific risks. Diversifying across more sectors could help reduce this risk.

Regions

  • North America
    99%
  • Europe Developed
    0%
  • Asia Developed
    0%
  • Latin America
    0%
  • Asia Emerging
    0%
  • Africa/Middle East
    0%

Geographically, the portfolio is almost entirely concentrated in North America, with 99.46% of the assets allocated there. The remaining small percentages are spread thinly across Europe Developed, Asia Developed, Latin America, Asia Emerging, and Africa/Middle East. This lack of geographic diversification exposes the portfolio to regional risks. Including more international investments could provide a hedge against local market downturns.

Dividends

  • Vanguard Small-Cap Index Fund ETF Shares 1.50%
  • Vanguard Mid-Cap Index Fund ETF Shares 1.60%
  • Vanguard S&P 500 ETF 1.30%
  • Vanguard Value Index Fund ETF Shares 2.40%
  • Vanguard Growth Index Fund ETF Shares 0.50%
  • Weighted yield (per year) 1.30%

The portfolio's dividend yield is not specified, but given the high concentration in growth-oriented ETFs, it is likely to be relatively low. Growth-focused investments typically reinvest earnings to fuel further growth rather than paying out dividends. While this strategy can lead to higher capital appreciation, it may not be suitable for investors seeking regular income.

Ongoing product costs

  • Vanguard Small-Cap Index Fund ETF Shares 0.05%
  • Vanguard Mid-Cap Index Fund ETF Shares 0.04%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Value Index Fund ETF Shares 0.04%
  • Vanguard Growth Index Fund ETF Shares 0.04%
  • Weighted costs total (per year) 0.04%

The portfolio's costs are impressively low, with a total expense ratio (TER) of just 0.04%. This is a significant advantage, as lower costs mean more of the investment returns are retained by the investor. Keeping investment costs low is a key component of long-term portfolio success, and this portfolio excels in that regard.

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