Growth Focused Portfolio with Strong Tech Bias and High Risk with Moderate Diversification

Report created on Dec 2, 2024

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

The portfolio is heavily concentrated in Vanguard ETFs, with a significant 66.91% allocation to the S&P 500 ETF. This indicates a strong focus on large-cap U.S. equities. The Information Technology Index Fund ETF holds 16.68%, highlighting a tech-heavy bias. The remaining allocations are in the Total Stock Market Index and Total International Stock Index ETFs. While the portfolio is moderately diversified, the heavy weighting in U.S. equities suggests a strong growth orientation. This composition might expose the portfolio to sector-specific risks, especially in the tech sector.

Growth Info

Historically, this portfolio has shown impressive performance with a Compound Annual Growth Rate (CAGR) of 14.8%. This suggests strong returns over time, reflecting the robust performance of the U.S. stock market, particularly the technology sector. However, the maximum drawdown of -33.52% indicates significant volatility, which is a common characteristic of growth-focused portfolios. This highlights the importance of understanding the potential for large fluctuations in value. Investors should be prepared for periods of volatility and ensure they have the risk tolerance to withstand such downturns.

Projection Info

Using a Monte Carlo simulation, we projected the portfolio's future performance based on historical data. This simulation ran 1,000 scenarios, assuming a hypothetical initial investment. The results show a 50th percentile end value of 465.21%, indicating potential for substantial growth. However, the 5th percentile value of 79.46% demonstrates the risk of underperformance. With an annualized return of 14.87%, the simulation supports the portfolio's historical growth trend. Investors should consider these projections when planning their long-term financial goals, as they offer insights into potential future outcomes.

Asset classes Info

  • Stocks
    100%

The portfolio is predominantly composed of stocks, accounting for 99.75% of the asset allocation. This high concentration in equities aligns with a growth-oriented investment strategy, offering potential for capital appreciation. However, the lack of diversification across different asset classes, such as bonds or real estate, may increase the portfolio's risk exposure. Investors seeking to mitigate risk might consider incorporating other asset classes to balance the portfolio. This could help reduce volatility and provide a more stable return profile over the long term.

Sectors Info

  • Technology
    42%
  • Financials
    11%
  • Health Care
    9%
  • Consumer Discretionary
    9%
  • Telecommunications
    7%
  • Industrials
    7%
  • Consumer Staples
    5%
  • Energy
    3%
  • Utilities
    2%
  • Real Estate
    2%
  • Basic Materials
    2%

The portfolio's sector allocation reveals a strong bias towards technology, which makes up 42.49% of the holdings. Financial services and healthcare follow, but with much smaller allocations. This tech-heavy focus reflects the sector's historical outperformance but also exposes the portfolio to sector-specific risks. A downturn in the technology industry could significantly impact the portfolio's value. To enhance diversification, investors might consider spreading their investments across a broader range of sectors. This strategy could help mitigate the risk of sector-specific downturns and provide more balanced exposure.

Regions Info

  • North America
    93%
  • Europe Developed
    3%
  • Asia Emerging
    1%
  • Japan
    1%
  • Asia Developed
    1%

Geographically, the portfolio is heavily weighted towards North America, with 93.14% of assets allocated there. This strong regional focus reflects a confidence in the U.S. market's growth potential. However, it also limits exposure to international markets, which could offer diversification benefits and growth opportunities. While there's some allocation to Europe and Asia, it's minimal. Investors might consider increasing their exposure to other regions to benefit from global economic growth and reduce reliance on the U.S. market. This could help in achieving a more globally diversified portfolio.

Redundant positions Info

  • Vanguard Total Stock Market Index Fund ETF Shares
    Vanguard S&P 500 ETF
    High correlation

The portfolio contains highly correlated assets, particularly between the Vanguard Total Stock Market Index Fund ETF and the Vanguard S&P 500 ETF. This correlation suggests overlapping holdings, which do not contribute to diversification. While these ETFs provide broad market exposure, their high correlation means they tend to move in the same direction. To improve diversification, investors could consider reducing exposure to overlapping assets. By doing so, the portfolio could benefit from a more varied set of investments, potentially reducing overall risk and enhancing return potential.

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.

Before optimizing for risk or return, the focus should be on reducing overlapping assets, like the highly correlated ETFs. Moving along the efficient frontier would allow the investor to adjust the risk-return profile by reallocating between high-growth and more conservative assets. For a riskier portfolio, increasing allocation to growth-oriented stocks would be ideal. Conversely, for a more conservative approach, incorporating more stable assets, such as bonds, could be beneficial. Prioritizing diversification and minimizing correlation among assets will be key to optimizing this portfolio effectively.

Dividends Info

  • Vanguard Information Technology Index Fund ETF Shares 0.60%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.20%
  • Vanguard Total International Stock Index Fund ETF Shares 3.00%
  • Weighted yield (per year) 1.22%

The portfolio's overall dividend yield is 1.22%, with the highest contribution from the Vanguard Total International Stock Index Fund ETF at 3.0%. This yield is relatively modest, reflecting the growth-focused nature of the portfolio. While dividends can provide a steady income stream, this portfolio prioritizes capital appreciation over income generation. Investors seeking higher income might consider increasing their allocation to dividend-paying assets. However, it's essential to balance the desire for income with the portfolio's growth objectives, ensuring that any changes align with long-term investment goals.

Ongoing product costs Info

  • Vanguard Information Technology Index Fund ETF Shares 0.10%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.05%

The portfolio benefits from low costs, with a total expense ratio (TER) of 0.05%. This low cost structure is advantageous, as it minimizes the drag on returns, allowing more of the portfolio's gains to be retained by the investor. The Vanguard S&P 500 ETF and Vanguard Total Stock Market Index Fund ETF Shares have particularly low expense ratios of 0.03%. Maintaining low costs is a key principle of successful investing, as it enhances long-term returns. Investors should continue to prioritize low-cost investments to maximize their portfolio's growth potential over time.

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