Moderately Diversified High-Risk Growth Portfolio with Strong Technology 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 aggressive investor with a high risk tolerance, aiming for substantial long-term growth. Such an investor is likely to have a longer investment horizon, possibly over 10 years, and can withstand significant market fluctuations. The primary goal is capital appreciation rather than income generation, making it suitable for someone who does not rely on their investments for regular income.

Positions

  • Vanguard S&P 500 ETF
    VOO - US9229083632
    35.00%
  • Schwab U.S. Large-Cap Growth ETF
    SCHG - US8085243009
    25.00%
  • Avantis® U.S. Small Cap Value ETF
    AVUV - US0250728773
    20.00%
  • VanEck Semiconductor ETF
    SMH - US92189F6768
    20.00%

This portfolio is composed of four ETFs, heavily weighted towards U.S. equities. The Vanguard S&P 500 ETF makes up 35%, Schwab U.S. Large-Cap Growth ETF 25%, Avantis U.S. Small Cap Value ETF 20%, and VanEck Semiconductor ETF 20%. This allocation indicates a strong emphasis on growth, particularly in large-cap and technology sectors. The portfolio is moderately diversified, primarily within the U.S. market, and has a high-risk classification, which suggests significant potential for both gains and losses.

Growth

Historically, this portfolio has shown impressive performance with a Compound Annual Growth Rate (CAGR) of 21.43%. However, it also experienced a maximum drawdown of -35.11%, indicating substantial risk during market downturns. The fact that 90% of returns are generated on just 20 days highlights the portfolio's volatility. This historical data underscores the potential for high returns, but also the necessity for a strong risk tolerance.

Projection

A Monte Carlo simulation, which uses random sampling to predict future performance, was conducted with 1,000 iterations. Assuming a hypothetical initial investment, the simulations show a wide range of outcomes. The 5th percentile result is 159.12%, the median (50th percentile) is 1,573.3%, and the 67th percentile is 2,677.77%. With an annualized return of 26.7%, this suggests robust potential growth, but also a high degree of uncertainty and risk.

Asset classes

  • Stocks
    100%
  • Cash
    0%

The portfolio is almost entirely composed of stocks, with 99.91% allocated to equities and a negligible 0.09% in cash. This heavy equity allocation aligns with the high-risk, high-reward nature of the portfolio. While equities offer substantial growth potential, they also come with significant volatility. To mitigate risks, incorporating a small percentage of bonds or other less volatile assets could be beneficial.

Sectors

  • Technology
    43%
  • Financials
    11%
  • Consumer Discretionary
    10%
  • Health Care
    8%
  • Industrials
    8%
  • Telecommunications
    7%
  • Energy
    5%
  • Consumer Staples
    3%
  • Basic Materials
    3%
  • Real Estate
    1%
  • Utilities
    1%

Sector allocation is heavily skewed towards technology, which comprises 43.29% of the portfolio. Other significant sectors include Financial Services (11.45%), Consumer Cyclicals (10.45%), and Healthcare (7.68%). This concentration in technology can drive high returns but also exposes the portfolio to sector-specific risks. Diversifying across more sectors could help stabilize returns and reduce sector-specific risks.

Regions

  • North America
    95%
  • Asia Developed
    3%
  • Europe Developed
    2%
  • Latin America
    0%
  • Asia Emerging
    0%
  • Africa/Middle East
    0%

Geographically, the portfolio is overwhelmingly concentrated in North America, with 95.23% of assets based there. Small allocations are made to Asia Developed (2.54%), Europe Developed (1.86%), and other regions. This geographic concentration increases exposure to the U.S. market's performance and risks. Diversifying internationally could help mitigate regional risks and tap into growth opportunities in other markets.

Dividends

  • Avantis® U.S. Small Cap Value ETF 1.60%
  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • VanEck Semiconductor ETF 0.50%
  • Vanguard S&P 500 ETF 1.30%
  • Weighted yield (per year) 0.98%

The portfolio's dividend yield is not specified, but given the focus on growth and technology stocks, the yield is likely low. Growth stocks typically reinvest earnings rather than paying dividends. For investors seeking income, adding dividend-paying stocks or ETFs could provide a more balanced income stream. However, this could slightly reduce the growth potential.

Ongoing product costs

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • VanEck Semiconductor ETF 0.35%
  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.14%

The total expense ratio (TER) for the portfolio is 0.14%, which is quite low. The Vanguard S&P 500 ETF has the lowest cost at 0.03%, while the VanEck Semiconductor ETF is the highest at 0.35%. Keeping investment costs low is crucial for maximizing net returns over time. Maintaining this low-cost structure while ensuring adequate diversification and risk management is advisable.

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