A growth-focused portfolio with high tech exposure and limited geographic diversity

Report created on Dec 20, 2024

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

This portfolio is heavily weighted towards the Vanguard S&P 500 ETF, which constitutes 75% of the total allocation. The remaining assets include a mix of technology-focused ETFs, Berkshire Hathaway common stock, and a total market index fund. While this composition reflects a growth-oriented strategy, it lacks diversification across different asset classes and regions. A more balanced portfolio might include a broader range of asset types like bonds or international equities to mitigate risks associated with market volatility.

Growth Info

Historically, the portfolio has performed impressively, achieving a Compound Annual Growth Rate (CAGR) of 15.22%. This suggests a robust growth trajectory when compared to typical market benchmarks. However, the maximum drawdown of -33.03% indicates vulnerability during market downturns. Past performance, while indicative of potential, doesn't guarantee future success. Investors should consider balancing high-growth potential with measures to protect against significant losses during volatile periods.

Projection Info

The Monte Carlo simulation, a method using historical data to predict future outcomes, shows an annualized return of 19.27% across 1,000 simulations. This suggests a strong potential for future growth, with most simulations resulting in positive returns. However, it's crucial to remember that these projections are based on past data and can't account for unforeseen market changes. Investors should use these projections as a guide but maintain flexibility to adjust strategies as market conditions evolve.

Asset classes Info

  • Stocks
    100%

The portfolio is almost entirely composed of stocks, with a negligible cash allocation. This heavy stock concentration aligns with a high-risk, high-reward strategy typical of growth portfolios. However, this lack of asset class diversification could expose the portfolio to significant risk during market downturns. Incorporating other asset classes, such as bonds or real estate, could provide a buffer against stock market volatility and enhance the portfolio's stability.

Sectors Info

  • Technology
    40%
  • Financials
    13%
  • Health Care
    9%
  • Consumer Discretionary
    9%
  • Telecommunications
    8%
  • Industrials
    6%
  • Consumer Staples
    5%
  • Energy
    3%
  • Utilities
    2%
  • Real Estate
    2%
  • Basic Materials
    2%

The portfolio is heavily concentrated in the technology sector, accounting for nearly 40% of the total allocation. While this sector has been a strong performer, it also tends to be more volatile, especially during economic shifts or regulatory changes. Diversifying into other sectors, such as healthcare or consumer staples, could reduce sector-specific risks and provide more balanced growth opportunities. This would align the portfolio more closely with broader market benchmarks.

Regions Info

  • North America
    98%
  • Europe Developed
    1%
  • Asia Developed
    1%

Geographically, the portfolio is overwhelmingly focused on North America, with over 98% of assets allocated there. This lack of international diversification could limit exposure to growth opportunities in emerging markets and increase vulnerability to regional economic downturns. Expanding geographic exposure to include more developed and emerging markets could enhance diversification and reduce region-specific risks, aligning the portfolio with global investment trends.

Redundant positions Info

  • iShares MSCI USA Quality Factor ETF
    Vanguard S&P 500 ETF
    Fidelity Total Market Index Fund
    High correlation
  • Fidelity® MSCI Information Technology Index ETF
    Invesco QQQ Trust
    High correlation

The portfolio contains several highly correlated assets, such as the iShares MSCI USA Quality Factor ETF and the Vanguard S&P 500 ETF. High correlation means these assets tend to move in the same direction, which can limit diversification benefits. Reducing overlap by selecting assets with lower correlation can enhance risk management and improve portfolio resilience during market downturns. This adjustment can optimize the portfolio's overall risk-return profile.

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.

Optimizing the portfolio using the Efficient Frontier could enhance the risk-return ratio by adjusting asset allocations. The Efficient Frontier is a concept that helps identify the best possible return for a given level of risk using the current assets. By reallocating investments to achieve this balance, the portfolio can potentially improve returns without increasing risk. However, this approach should be tailored to the investor's specific risk tolerance and financial goals.

Dividends Info

  • Fidelity Total Market Index Fund 0.20%
  • Fidelity® MSCI Information Technology Index ETF 0.40%
  • Invesco QQQ Trust 0.40%
  • iShares MSCI USA Quality Factor ETF 0.80%
  • Vanguard S&P 500 ETF 0.90%
  • Weighted yield (per year) 0.74%

With a total dividend yield of 0.74%, the portfolio provides modest income from dividends. This yield is relatively low, reflecting the growth-oriented focus of the portfolio, which prioritizes capital appreciation over income generation. For investors seeking more income, increasing allocations to dividend-paying stocks or funds could enhance cash flow. However, this should be balanced with the portfolio's growth objectives to maintain alignment with long-term goals.

Ongoing product costs Info

  • Fidelity Total Market Index Fund 0.02%
  • Fidelity® MSCI Information Technology Index ETF 0.08%
  • Invesco QQQ Trust 0.20%
  • iShares MSCI USA Quality Factor ETF 0.15%
  • VanEck Semiconductor ETF 0.35%
  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.06%

The portfolio's total expense ratio (TER) is impressively low at 0.06%, which supports better long-term performance by minimizing costs. Lower fees mean more of the portfolio's returns are retained, compounding over time to enhance growth. Investors should continue to prioritize low-cost investment options to maintain this advantage. Regularly reviewing and comparing the costs of existing and potential new investments can help ensure cost efficiency.

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