A growth-focused portfolio with high tech exposure and limited diversification

Report created on Jan 5, 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 weighted in ETFs, with a significant allocation to growth-focused funds. The Vanguard Growth Index Fund ETF Shares and SPDR S&P 500 ETF Trust make up over half of the portfolio. This composition leans towards a growth strategy, characterized by a focus on capital appreciation. Compared to common benchmarks, this portfolio is less diversified and more concentrated in specific funds. While this can lead to higher potential returns, it also increases exposure to market volatility. Consider diversifying by including assets that offer different risk profiles to balance growth potential with stability.

Growth Info

Historically, the portfolio has demonstrated strong performance, with a Compound Annual Growth Rate (CAGR) of 16.18%. This impressive growth rate suggests that the portfolio has effectively captured market upswings. However, the maximum drawdown of -31.98% highlights the potential for significant losses during market downturns. While past performance is not indicative of future results, it provides a useful benchmark. Ensuring the portfolio can withstand market fluctuations is crucial—consider strategies to mitigate potential drawdowns, such as incorporating more defensive assets.

Projection Info

Monte Carlo simulations, which use historical data to project future outcomes, suggest an annualized return of 18.35% with a high likelihood of positive returns. The simulations show a wide range of potential outcomes, emphasizing the inherent uncertainty in forecasting. While the median projection is favorable, the portfolio's concentrated nature could amplify risks in adverse market conditions. To improve resilience, consider scenarios where diversification could cushion against unexpected market shifts.

Asset classes Info

  • Stocks
    100%

The portfolio is predominantly invested in stocks, representing 99.85% of the allocation. This heavy stock concentration aligns with a growth-focused strategy but limits exposure to other asset classes like bonds or commodities, which can provide stability and income. Compared to diversified benchmarks, this allocation lacks balance. Introducing a mix of asset classes can enhance diversification, potentially smoothing returns during market volatility and providing a more stable investment journey.

Sectors Info

  • Technology
    45%
  • Consumer Discretionary
    14%
  • Telecommunications
    12%
  • Health Care
    7%
  • Financials
    7%
  • Industrials
    5%
  • Consumer Staples
    4%
  • Energy
    2%
  • Basic Materials
    1%
  • Real Estate
    1%
  • Utilities
    1%

The portfolio's sector allocation is heavily skewed towards technology, which constitutes 45.26% of the investment. While technology has been a strong performer, this concentration increases vulnerability to sector-specific risks, such as regulatory changes or market corrections. Other sectors like Consumer Cyclicals and Communication Services are also prominent but not as dominant. To mitigate sector risk, consider redistributing investments to achieve a more balanced sector exposure, aligning with broader market benchmarks.

Regions Info

  • North America
    99%

Geographically, the portfolio is overwhelmingly concentrated in North America, accounting for 99.47% of the allocation. This regional focus can limit diversification benefits and expose the portfolio to region-specific economic risks. Compared to global benchmarks, the portfolio lacks international exposure, which can be beneficial for capturing growth in emerging markets and hedging against local economic downturns. Expanding geographic diversity could enhance the portfolio's robustness and potential for global growth.

Redundant positions Info

  • SPDR S&P 500 ETF Trust
    Vanguard Growth Index Fund ETF Shares
    Invesco QQQ Trust
    Vanguard S&P 500 Growth Index Fund ETF Shares
    High correlation

The portfolio's assets are highly correlated, meaning they tend to move in the same direction. This high correlation limits diversification benefits, as the portfolio's performance is closely tied to the same market factors. During market downturns, this could lead to significant losses across all holdings. To improve diversification and reduce risk, consider incorporating assets with lower correlation to the existing ones, such as bonds or international equities, which may behave differently under various market conditions.

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 can potentially be optimized using the Efficient Frontier, a concept that identifies the best possible risk-return ratio for a given set of assets. However, the current asset overlap and high correlation limit the benefits of such optimization. Before pursuing optimization, focus on diversifying the asset base to include less correlated investments. This will provide a more solid foundation for achieving an efficient balance between risk and return, enhancing the portfolio's overall performance.

Dividends Info

  • Invesco QQQ Trust 0.60%
  • SPDR S&P 500 ETF Trust 0.90%
  • Vanguard S&P 500 Growth Index Fund ETF Shares 0.30%
  • Vanguard Growth Index Fund ETF Shares 0.50%
  • Weighted yield (per year) 0.57%

The portfolio's dividend yield is relatively low at 0.57%, reflecting its growth-oriented focus. While dividends can provide a steady income stream, this low yield suggests that the portfolio prioritizes capital appreciation over income generation. For investors seeking regular income, incorporating higher-yielding assets could be beneficial. However, for those focused on growth, the current yield aligns with the strategy. Balancing growth and income objectives may require adjusting the asset mix to include dividend-paying stocks.

Ongoing product costs Info

  • Invesco QQQ Trust 0.20%
  • SPDR S&P 500 ETF Trust 0.10%
  • Vanguard S&P 500 Growth Index Fund ETF Shares 0.10%
  • Vanguard Growth Index Fund ETF Shares 0.04%
  • Weighted costs total (per year) 0.09%

The portfolio's total expense ratio (TER) is 0.09%, which is impressively low and supports better long-term performance by minimizing costs. Low costs are crucial for maximizing returns, as they compound over time. This cost efficiency is a positive aspect of the portfolio, aligning with best practices in investment management. While maintaining low costs is important, ensure that the drive for cost reduction does not compromise diversification or asset quality, which are equally vital for a robust portfolio.

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