High-Risk Growth Portfolio with Low Diversification and Heavy 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 is suitable for an aggressive investor who is comfortable with high risk and volatility. Such an investor typically has a long-term investment horizon and seeks substantial capital appreciation. They are not overly concerned with short-term market fluctuations and are willing to accept significant drawdowns. This investor is likely focused on maximizing growth and can tolerate the high concentration in specific sectors and regions, understanding the potential for both high returns and high risk.

Positions

  • Vanguard S&P 500 ETF
    VOO - US9229083632
    40.30%
  • Vanguard Information Technology Index Fund ETF Shares
    VGT - US92204A7028
    30.70%
  • Invesco NASDAQ 100 ETF
    QQQM - US46138G6492
    29.00%

The portfolio is heavily concentrated in three ETFs: Vanguard S&P 500 ETF (40.3%), Vanguard Information Technology Index Fund ETF Shares (30.7%), and Invesco NASDAQ 100 ETF (29%). This composition shows a strong tilt towards large-cap U.S. stocks, particularly in the technology sector. While these ETFs are well-regarded, the lack of diversification could expose the portfolio to significant sector-specific risks. To mitigate this, consider diversifying into other sectors and asset classes to spread risk more evenly across the portfolio.

Growth

Historically, the portfolio has performed well, boasting a compound annual growth rate (CAGR) of 13.43%. However, it also experienced a maximum drawdown of -30.71%, indicating substantial volatility. This high performance comes with high risk, which is typical for a growth-oriented portfolio. To better manage risk, it might be wise to include some less volatile investments. This could help stabilize returns during market downturns.

Projection

Using a Monte Carlo simulation with 1,000 iterations, the portfolio shows a wide range of potential outcomes. The 5th percentile projects a 59.35% return, while the 50th percentile projects 499.53%, and the 67th percentile projects 803.41%. This indicates a high level of uncertainty but also significant upside potential. Such simulations highlight the importance of maintaining a long-term investment horizon to ride out periods of volatility and capitalize on potential gains.

Asset classes

  • Stocks
    100%
  • Cash
    0%

The portfolio is almost entirely composed of stocks (99.8%), with a negligible amount in cash (0.2%). This heavy allocation to equities is typical for a high-risk, growth-oriented portfolio but leaves little room for risk mitigation. To reduce overall portfolio risk, consider adding bonds or other fixed-income securities. This can provide a buffer against stock market volatility and contribute to more stable returns over time.

Sectors

  • Technology
    57%
  • Telecommunications
    8%
  • Consumer Discretionary
    8%
  • Health Care
    7%
  • Financials
    5%
  • Industrials
    5%
  • Consumer Staples
    4%
  • Energy
    2%
  • Basic Materials
    1%
  • Utilities
    1%
  • Real Estate
    1%

The sector allocation is heavily skewed towards technology (57.1%), followed by smaller allocations in Communication Services (8.3%) and Consumer Cyclicals (8%). This concentration in a single sector increases vulnerability to sector-specific downturns. Diversifying into other sectors like Healthcare, Financial Services, and Industrials can help balance the portfolio. This would reduce dependence on the technology sector and provide more stable returns.

Regions

  • North America
    99%
  • Europe Developed
    1%
  • Latin America
    0%
  • Asia Emerging
    0%
  • Asia Developed
    0%
  • Africa/Middle East
    0%

Geographically, the portfolio is overwhelmingly focused on North America (98.7%), with minimal exposure to other regions. This lack of international diversification can be a risk if the U.S. market underperforms. Including investments from Europe, Asia, and other regions could provide a hedge against regional downturns and tap into growth opportunities in other parts of the world. This would make the portfolio more resilient to geographic-specific risks.

Dividends

  • Invesco NASDAQ 100 ETF 0.70%
  • Vanguard Information Technology Index Fund ETF Shares 0.70%
  • Vanguard S&P 500 ETF 1.40%
  • Weighted yield (per year) 0.98%

The portfolio's dividend yield is not provided, but given the high concentration in growth-oriented ETFs, it is likely to be low. While growth stocks offer high capital appreciation potential, they often pay lower dividends. For investors seeking income, incorporating dividend-paying stocks or ETFs could be beneficial. This would provide a steady income stream and reduce reliance on capital gains for returns, adding another layer of diversification.

Ongoing product costs

  • Invesco NASDAQ 100 ETF 0.15%
  • Vanguard Information Technology Index Fund ETF Shares 0.10%
  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.09%

The total expense ratio (TER) of the portfolio is 0.09%, which is quite low. The individual costs are 0.15% for Invesco NASDAQ 100 ETF, 0.1% for Vanguard Information Technology Index Fund ETF Shares, and 0.03% for Vanguard S&P 500 ETF. Low costs are a significant advantage, as they allow more of the investment returns to be retained. Keeping investment costs low is a key principle for long-term portfolio growth. This cost efficiency should be maintained while considering diversification.

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