An aggressive portfolio heavily weighted in technology with low geographic and sector diversification

Report created on Dec 7, 2024

Risk profile Info

6/7
Aggressive
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

The portfolio is heavily skewed towards technology, with a significant 42% allocation in NVIDIA Corporation, making it highly concentrated. The rest of the portfolio includes large positions in Vanguard S&P 500 ETF and Vanguard Total Stock Market Index Fund ETF Shares, with smaller stakes in other tech stocks. This composition indicates a strong focus on growth stocks, particularly within the tech sector. Such concentration can lead to high volatility, as the portfolio's performance is closely tied to the tech industry's fortunes. To mitigate risk, consider diversifying by adding assets from different sectors or asset classes.

Growth Info

Historically, the portfolio has delivered an impressive CAGR of 43.24%, although it experienced a substantial maximum drawdown of -49.56%. This suggests that while the portfolio can generate high returns, it is also subject to significant volatility. The concentrated nature means that a few days account for most of the returns, indicating reliance on short-term market movements. Historical data provides insights but doesn’t guarantee future performance. Consider strategies to reduce drawdown, such as diversifying into less volatile assets or sectors, to stabilize returns over time.

Projection Info

The Monte Carlo simulation, which uses historical data to model potential future outcomes, projects a wide range of possible returns. With a 50th percentile projection of 8,261.34% and a high annualized return across simulations, the portfolio could continue to perform well. However, the reliance on historical data means these projections are not foolproof. The simulation indicates a high probability of positive returns, but with significant variance. To align with personal risk tolerance and goals, consider balancing the portfolio to reduce exposure to high-risk assets, while maintaining growth potential.

Asset classes Info

  • Stocks
    100%

The portfolio is overwhelmingly concentrated in stocks, with a negligible allocation to cash. This focus on equities aligns with an aggressive investment strategy, aiming for high returns but also increasing risk exposure. Such a lack of asset class diversification can leave the portfolio vulnerable to market downturns. To enhance stability, consider incorporating other asset classes like bonds or real estate, which can provide a buffer during stock market volatility. A more balanced asset allocation could enhance long-term performance by smoothing out returns.

Sectors Info

  • Technology
    67%
  • Financials
    6%
  • Health Care
    5%
  • Consumer Discretionary
    5%
  • Telecommunications
    4%
  • Industrials
    4%
  • Consumer Staples
    3%
  • Energy
    2%
  • Utilities
    1%
  • Real Estate
    1%
  • Basic Materials
    1%

A staggering 67.39% of the portfolio is invested in the technology sector, which significantly skews its sectoral diversification. While this can lead to high returns during tech booms, it also exposes the portfolio to sector-specific risks. There is minimal exposure to other sectors like healthcare, financial services, and consumer cyclicals. To mitigate risk, it’s advisable to diversify across more sectors. This can reduce the impact of sector-specific downturns and provide a more balanced growth trajectory, especially in volatile market conditions.

Regions Info

  • North America
    100%

The portfolio's geographic allocation is heavily concentrated in North America, with over 99% exposure. This lack of geographic diversification increases vulnerability to regional economic downturns. While the U.S. market has historically been strong, global diversification can provide exposure to different growth cycles and economic conditions. Consider adding international assets to capture opportunities in emerging markets and other developed regions, which can also offer a hedge against currency and geopolitical risks.

Redundant positions Info

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

The portfolio contains highly correlated assets, particularly between the Vanguard S&P 500 ETF and the Vanguard Total Stock Market Index Fund ETF Shares. High correlation means these assets tend to move in tandem, reducing diversification benefits. This can amplify risk, as losses in one asset are likely mirrored in the other. To improve diversification, consider replacing some correlated assets with those that have lower correlation, thereby enhancing the portfolio’s ability to weather market fluctuations and potentially improving risk-adjusted returns.

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.

The portfolio could benefit from optimization using the Efficient Frontier, which aims to maximize returns for a given level of risk. Currently, the portfolio’s high concentration in correlated tech stocks suggests inefficiency. By reallocating assets to achieve a better risk-return balance, the portfolio can move closer to the Efficient Frontier. This doesn’t necessarily mean adding new assets, but rather adjusting current allocations to improve efficiency. Consider consulting with a financial advisor to explore optimization strategies tailored to your risk tolerance and investment objectives.

Dividends Info

  • Marvell Technology Group Ltd 0.20%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.20%
  • Weighted yield (per year) 0.58%

The portfolio’s dividend yield is modest at 0.58%, with the highest contributions from the Vanguard ETFs. While dividends can provide a steady income stream, this portfolio’s focus is clearly on capital appreciation rather than income generation. For those seeking higher income, consider increasing exposure to dividend-paying stocks or ETFs. This can provide a cushion during market downturns and contribute to total returns, especially for investors looking for a blend of growth and income.

Ongoing product costs Info

  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Weighted costs total (per year) 0.01%

Portfolio costs are low, with Vanguard ETFs having expense ratios of 0.03%, which is advantageous for long-term growth. Low costs mean more of your money remains invested, compounding over time. While the cost structure is efficient, always be on the lookout for hidden fees or potential cost reductions. Continuous monitoring of fund expenses and seeking out lower-cost alternatives where possible can further enhance net returns. Maintaining a low-cost portfolio is a key strategy for maximizing long-term wealth accumulation.

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