A tech-heavy portfolio with high concentration in Amazon and limited international diversification

Report created on Jan 8, 2025

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, with Amazon making up 57.6% of the total allocation. This high concentration in a single stock increases risk, as the portfolio's performance is largely tied to Amazon's fortunes. The remainder includes a mix of other tech stocks and ETFs, but the overall composition lacks balance. A more diversified allocation could reduce risk by spreading exposure across different sectors and asset classes, aligning more closely with common benchmark compositions that emphasize diversification.

Growth Info

Historically, the portfolio has performed well, with a Compound Annual Growth Rate (CAGR) of 14.36%. However, it experienced a significant maximum drawdown of -38.81%, indicating vulnerability to market downturns. The performance has been driven by a few key days, which highlights the potential volatility of such a concentrated portfolio. Comparing this to broader benchmarks, the returns are competitive, but the high drawdown suggests a need for caution and possibly a more balanced approach to mitigate future risks.

Projection Info

Forward projections using Monte Carlo simulations show a wide range of potential outcomes. Monte Carlo analysis uses historical data to simulate future returns, providing a probabilistic view of portfolio performance. The median projection suggests a 632.46% return, but variability is high, with the 5th percentile at 82.6%. This highlights the uncertainty inherent in forecasting and underscores the importance of diversification to potentially stabilize returns across different market conditions.

Asset classes Info

  • Stocks
    100%

The portfolio is overwhelmingly invested in stocks, with 99.89% allocation. This lack of diversification across asset classes exposes the portfolio to equity market fluctuations. Common benchmarks often include a mix of stocks, bonds, and other assets to balance risk and return. Introducing bonds or alternative investments could help mitigate volatility and provide more stable returns, especially during periods of stock market stress.

Sectors Info

  • Consumer Discretionary
    61%
  • Technology
    23%
  • Telecommunications
    3%
  • Health Care
    2%
  • Financials
    2%
  • Energy
    2%
  • Industrials
    2%
  • Consumer Staples
    2%
  • Basic Materials
    1%
  • Utilities
    1%

The portfolio is heavily weighted towards consumer cyclicals and technology, which together comprise over 84% of the allocation. This concentration can lead to increased volatility, particularly in economic downturns when consumer spending may decline. While these sectors have driven past performance, diversifying into more stable sectors like healthcare or utilities could provide a buffer against sector-specific risks and align better with diversified benchmarks.

Regions Info

  • North America
    96%
  • Europe Developed
    3%

With 95.85% of the portfolio concentrated in North America, there is limited geographic diversification. This overexposure to a single region can increase vulnerability to regional economic downturns. Common benchmarks often include a more balanced global allocation. Expanding exposure to international markets could enhance diversification and potentially improve risk-adjusted returns by tapping into growth opportunities abroad.

Redundant positions Info

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

The portfolio includes highly correlated assets, such as the Vanguard Total Stock Market Index Fund ETF Shares and the Vanguard S&P 500 ETF. High correlation means these assets tend to move together, which can limit diversification benefits. During market downturns, such assets may not provide the desired risk mitigation. Reducing overlap by choosing less correlated investments can enhance diversification and improve overall portfolio resilience.

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 current portfolio could be optimized for better risk-return efficiency. The Efficient Frontier concept suggests that for a given level of risk, there is an optimal portfolio that offers the highest expected return. By reducing correlated assets and rebalancing, the portfolio could achieve a higher expected return of 22.20% with a similar risk level. This involves reallocating within the existing assets to improve the risk-return profile while maintaining overall risk.

Dividends Info

  • Apple Inc 0.40%
  • Xtrackers MSCI EAFE Hedged Equity ETF 0.60%
  • Invesco NASDAQ 100 ETF 0.60%
  • Shell PLC ADR 4.20%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Vanguard Total International Stock Index Fund ETF Shares 3.30%
  • Weighted yield (per year) 0.41%

The portfolio's overall dividend yield is 0.41%, which is relatively low. While dividends are not the primary focus of a growth-oriented portfolio, they can provide a steady income stream and help cushion against market volatility. Increasing exposure to higher-yielding assets could enhance income potential without significantly altering the growth profile, offering a more balanced approach to total returns.

Ongoing product costs Info

  • Xtrackers MSCI EAFE Hedged Equity ETF 0.36%
  • Invesco NASDAQ 100 ETF 0.15%
  • 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) 0.03%

The portfolio's total expense ratio (TER) is impressively low at 0.03%, supporting better long-term performance by minimizing costs. Low fees are beneficial because they ensure more of the investment returns are retained by the investor. Maintaining this cost efficiency is important, but it's also crucial to balance it with the need for diversification and strategic asset allocation to optimize risk-adjusted returns.

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