A tech-focused growth portfolio with high correlation and low geographic diversification

Report created on Jan 21, 2025

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

The portfolio is heavily concentrated, with 75% in the Vanguard S&P 500 ETF and the rest in two other ETFs. This composition leans towards a high exposure to large-cap U.S. equities. Compared to a diversified benchmark, this portfolio lacks exposure to other asset classes like bonds or international equities. This heavy concentration in U.S. stocks may limit opportunities for risk mitigation. To enhance diversification, consider incorporating other asset classes or regions to balance the portfolio and potentially reduce risk.

Growth Info

Historically, the portfolio has performed well, with a CAGR of 15.56%. This impressive growth rate indicates strong past performance, especially driven by the U.S. market's recent success. However, the max drawdown of -33.32% highlights its vulnerability during market downturns. While past performance is a useful gauge, it doesn't guarantee future results. It's essential to prepare for potential volatility by considering more diversified investments, which could help cushion against future downturns.

Projection Info

Forward projections using Monte Carlo simulations suggest a wide range of outcomes, with a median return of 890.7%. This method uses historical data to simulate future returns, offering a probabilistic view rather than a guarantee. While the annualized return of 19.39% across simulations is promising, remember that these are potential scenarios based on past data. Consider stress-testing the portfolio under different economic conditions to ensure it aligns with long-term goals and risk tolerance.

Asset classes Info

  • Stocks
    100%

The portfolio is 100% invested in stocks, which may lead to increased volatility. While stocks offer growth potential, they also come with higher risk compared to bonds or cash. This lack of asset class diversification can amplify losses during market downturns. To mitigate risk, consider adding fixed-income securities or alternative investments to balance the portfolio. This approach can help stabilize returns and provide a buffer against stock market fluctuations.

Sectors Info

  • Technology
    45%
  • Financials
    11%
  • Consumer Discretionary
    10%
  • Health Care
    9%
  • Telecommunications
    8%
  • Industrials
    6%
  • Consumer Staples
    4%
  • Energy
    3%
  • Utilities
    2%
  • Real Estate
    2%
  • Basic Materials
    1%

Sector allocation is heavily skewed towards technology, comprising 45% of the portfolio. This concentration can lead to higher volatility, especially during periods of tech sector downturns or regulatory changes. While tech has been a strong performer, it's important to diversify across sectors to reduce sector-specific risks. Consider reallocating some funds to underrepresented sectors like consumer defensive or utilities, which can offer stability during economic uncertainty.

Regions Info

  • North America
    99%

With 99% of the portfolio allocated to North America, geographic diversification is notably lacking. This heavy U.S. focus may expose the portfolio to regional economic risks and miss out on growth opportunities in other markets. Diversifying geographically can help mitigate these risks and capture growth in emerging markets. Consider adding international equities to achieve a more balanced global exposure, potentially enhancing long-term returns and reducing risk.

Market capitalization Info

  • Mega-cap
    49%
  • Large-cap
    32%
  • Mid-cap
    16%
  • Small-cap
    2%

The portfolio is predominantly invested in mega and big-cap stocks, accounting for 81% of the allocation. This focus on large-cap companies provides stability and liquidity but may limit exposure to the growth potential of smaller companies. Including small and mid-cap stocks could enhance diversification and provide opportunities for higher returns. A balanced market capitalization approach can help capture different growth dynamics across various company sizes.

Redundant positions Info

  • Vanguard Information Technology Index Fund ETF Shares
    Vanguard S&P 500 ETF
    Vanguard Growth Index Fund ETF Shares
    High correlation

The assets in the portfolio are highly correlated, meaning they tend to move together. This correlation reduces the diversification benefits, as all assets may decline in value simultaneously during market downturns. To improve diversification, consider adding uncorrelated assets that can perform differently under various market conditions. This strategy can help smooth out returns and reduce overall portfolio risk.

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 along the Efficient Frontier, which seeks the best risk-return trade-off. By adjusting the current asset allocation, it's possible to achieve a more efficient portfolio. However, the high correlation between assets limits diversification benefits. Consider replacing some correlated assets with those that offer different risk-return characteristics. This approach can help achieve a more optimal balance between risk and return.

Dividends Info

  • Vanguard Information Technology Index Fund ETF Shares 0.60%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Growth Index Fund ETF Shares 0.50%
  • Weighted yield (per year) 1.04%

The portfolio's dividend yield is relatively low at 1.04%, reflecting its growth-oriented nature. While dividends can provide a steady income stream, this portfolio prioritizes capital appreciation over income. Investors seeking income may consider adding higher-yielding assets. However, if growth is the primary goal, maintaining a focus on capital gains is appropriate. Balancing growth and income can be achieved by adjusting the asset allocation to include dividend-focused investments.

Ongoing product costs Info

  • Vanguard Information Technology Index Fund ETF Shares 0.10%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Growth Index Fund ETF Shares 0.04%
  • Weighted costs total (per year) 0.04%

The portfolio's total expense ratio (TER) is impressively low at 0.04%, which is beneficial for long-term performance. Lower costs mean more of the portfolio's returns are retained by the investor, enhancing compounding over time. This cost efficiency aligns with best practices in portfolio management. Continue to monitor fees and consider cost-effective options when rebalancing or adding new investments to maintain this advantage.

What next?

Ready to invest in this portfolio?

Select a broker that fits your needs and watch for low fees to maximize your returns.

Select broker

Create your own report?

Analyze your portfolio

Join our community!

Join Discord

The information provided on this platform is for informational purposes only and should not be considered as financial or investment advice. Insightfolio does not provide investment advice, personalized recommendations, or guidance regarding the purchase, holding, or sale of financial assets. The tools and content are intended for educational purposes only and are not tailored to individual circumstances, financial needs, or objectives.

Insightfolio assumes no liability for the accuracy, completeness, or reliability of the information presented. Users are solely responsible for verifying the information and making independent decisions based on their own research and careful consideration. Use of the platform should not replace consultation with qualified financial professionals.

Investments involve risks. Users should be aware that the value of investments may fluctuate and that past performance is not an indicator of future results. Investment decisions should be based on personal financial goals, risk tolerance, and independent evaluation of relevant information.

Insightfolio does not endorse or guarantee the suitability of any particular financial product, security, or strategy. Any projections, forecasts, or hypothetical scenarios presented on the platform are for illustrative purposes only and are not guarantees of future outcomes.

By accessing the services, information, or content offered by Insightfolio, users acknowledge and agree to these terms of the disclaimer. If you do not agree to these terms, please do not use our platform.

Instrument logos provided by Elbstream.

Help us improve Insightfolio

Your feedback makes a difference! Share your thoughts in our quick survey. Take the survey