A tech-heavy growth portfolio with limited geographic and sector diversification

Report created on Feb 14, 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 in equities, with a significant allocation to large-cap U.S. stocks. It consists of four ETFs, with the Vanguard S&P 500 ETF making up 50% of the portfolio, followed by the Invesco NASDAQ 100 ETF and Vanguard Information Technology Index Fund ETF Shares at 20% each. The Vanguard Total Stock Market Index Fund ETF Shares account for the remaining 10%. This composition suggests a strong focus on U.S. large-cap growth, potentially limiting diversification. Consider diversifying into other asset classes like bonds or international equities to balance risk and enhance stability.

Growth Info

Historically, the portfolio has delivered impressive returns, with a CAGR of 16.50%, significantly outperforming many benchmarks. However, it also experienced a maximum drawdown of -28.69%, highlighting potential volatility. The portfolio's strong performance is driven by its tech-heavy allocation, which has benefited from recent market trends. While past performance is not a guarantee of future results, maintaining a focus on growth sectors could continue to yield high returns. To mitigate risk, consider incorporating assets with lower volatility or diversifying into sectors less correlated with technology.

Projection Info

The Monte Carlo simulation, which uses historical data to project future outcomes, indicates strong potential for the portfolio, with an annualized return of 18.02%. However, it's important to note that simulations rely on historical data, which may not predict future market conditions accurately. The 50th percentile projection shows a potential portfolio value increase of 711.9%, suggesting substantial growth potential. While these projections are promising, it's crucial to remember that market conditions can change, and diversifying across asset classes and regions could help mitigate unforeseen risks.

Asset classes Info

  • Stocks
    100%

The portfolio is entirely composed of stocks, which can offer high returns but also come with increased risk. This lack of diversification across asset classes may expose the portfolio to significant volatility during market downturns. A well-diversified portfolio typically includes a mix of stocks, bonds, and other asset classes to balance risk and return. Consider adding fixed-income securities or alternative investments to reduce risk and provide more stable returns over time, enhancing the portfolio's resilience in various market conditions.

Sectors Info

  • Technology
    50%
  • Consumer Discretionary
    9%
  • Telecommunications
    8%
  • Financials
    8%
  • Health Care
    7%
  • Industrials
    5%
  • Consumer Staples
    4%
  • Energy
    2%
  • Utilities
    2%
  • Real Estate
    1%
  • Basic Materials
    1%

With a 50% allocation to technology, the portfolio is heavily concentrated in this sector, potentially increasing its sensitivity to tech market fluctuations. Other sectors like Consumer Cyclicals and Communication Services make up smaller portions, with less than 10% each. This concentration may lead to higher volatility, especially during periods of regulatory changes or interest rate hikes affecting tech stocks. To reduce sector-specific risks, consider diversifying into other sectors like healthcare, industrials, or consumer staples, which may offer more stability and counterbalance tech sector volatility.

Regions Info

  • North America
    99%
  • Europe Developed
    1%

The portfolio is predominantly focused on North America, with 99% of its assets allocated to this region. This geographic concentration limits exposure to international markets, which could provide diversification benefits and reduce overall portfolio risk. Global diversification can help mitigate regional economic downturns and capture growth opportunities in emerging markets. Consider increasing exposure to developed and emerging markets outside of North America to enhance diversification and potentially improve risk-adjusted returns.

Market capitalization Info

  • Mega-cap
    48%
  • Large-cap
    33%
  • Mid-cap
    15%
  • Small-cap
    3%
  • Micro-cap
    1%

The portfolio is primarily invested in mega and big-cap stocks, accounting for 81% of the allocation. This focus on larger companies can provide stability and consistent returns but may limit exposure to the growth potential of smaller firms. Medium, small, and micro-cap stocks make up a smaller portion, offering diversification benefits and the possibility of higher returns. To capture growth opportunities, consider increasing exposure to smaller-cap stocks, which can add diversity and potentially enhance long-term performance.

Redundant positions Info

  • Vanguard Information Technology Index Fund ETF Shares
    Invesco NASDAQ 100 ETF
    High correlation
  • 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 Information Technology Index Fund ETF Shares and Invesco NASDAQ 100 ETF, as well as between the Vanguard Total Stock Market Index Fund ETF Shares and Vanguard S&P 500 ETF. High correlation can limit diversification benefits, as these assets tend to move together, especially during market downturns. To improve diversification, consider replacing one of the correlated ETFs with an asset that has a lower correlation to the existing holdings, thereby reducing 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 using the Efficient Frontier, a concept that identifies the best risk-return ratio for a given set of assets. Currently, the portfolio's high correlation among assets may limit its efficiency. By adjusting the allocation between existing holdings and reducing overlap, the portfolio can potentially achieve a better balance between risk and return. This optimization process focuses on reallocating within the existing assets to improve performance without necessarily adding new ones.

Dividends Info

  • Invesco NASDAQ 100 ETF 0.60%
  • 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%
  • Weighted yield (per year) 0.96%

The portfolio's dividend yield stands at 0.96%, with contributions from the Vanguard S&P 500 ETF and Vanguard Total Stock Market Index Fund ETF Shares. While not a primary focus for growth-oriented portfolios, dividends can provide a steady income stream and enhance total returns. For investors seeking income, consider increasing exposure to dividend-paying stocks or funds. However, be mindful of maintaining a balance between growth and income to align with long-term investment objectives.

Ongoing product costs Info

  • Invesco NASDAQ 100 ETF 0.15%
  • 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%
  • Weighted costs total (per year) 0.07%

The portfolio's total expense ratio (TER) is a low 0.07%, indicating cost-efficiency. Lower costs can significantly enhance long-term returns by minimizing the impact of fees on performance. This is a positive aspect, as it allows more of the portfolio's gains to be retained by the investor. Continue to monitor expense ratios and consider cost-effective options when making adjustments to the portfolio. Maintaining low costs is crucial for maximizing returns over the long term.

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