A growth-focused portfolio with strong technology exposure and limited geographic diversification

Report created on Dec 7, 2024

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

This portfolio is heavily weighted towards equity ETFs, with a substantial 35% in iShares Factors US Growth Style ETF and 30% in Vanguard S&P 500 ETF. These two ETFs alone make up 65% of the portfolio, indicating a strong focus on large-cap U.S. stocks. The remaining 35% is allocated to more specialized ETFs, including VanEck Semiconductor ETF, Avantis® U.S. Small Cap Value ETF, and a global stock ETF from Vanguard. This composition reflects a growth-oriented strategy, with a moderate level of diversification. It's important to note that the portfolio's heavy reliance on U.S. equities could expose it to domestic market volatility.

Growth Info

Historically, this portfolio has shown impressive growth with a compound annual growth rate (CAGR) of 20.15%. However, it has also experienced significant volatility, evidenced by a maximum drawdown of -33.82%. This means that while the portfolio has the potential for high returns, it also carries substantial risk. The concentration in a few high-growth sectors could lead to periods of sharp declines. Investors should be aware that past performance is not indicative of future results, and the historical data should be used as a guide rather than a guarantee.

Projection Info

Forward projections using Monte Carlo simulations suggest a wide range of potential outcomes, with the 5th percentile returning 134.03% and the 67th percentile reaching 1,720.3%. This method uses historical data to simulate future performance, providing a probabilistic view of different scenarios. While the median outcome is promising, the variability highlights the inherent uncertainty in predicting market movements. Investors should use these projections to understand potential risks and rewards but remain cautious as simulations rely on historical patterns that may not repeat.

Asset classes Info

  • Stocks
    100%

The portfolio is predominantly composed of stocks, with a staggering 99.8% allocation, leaving minimal room for other asset classes like bonds or cash. This concentration in equities is typical for a growth-oriented strategy, aiming to maximize returns over the long term. However, the lack of diversification across asset classes increases the portfolio's sensitivity to market downturns. Investors might consider incorporating some fixed-income assets to balance risk and provide stability during volatile periods.

Sectors Info

  • Technology
    45%
  • Financials
    12%
  • Consumer Discretionary
    10%
  • Health Care
    7%
  • Telecommunications
    7%
  • Industrials
    7%
  • Energy
    4%
  • Consumer Staples
    3%
  • Basic Materials
    2%
  • Utilities
    1%
  • Real Estate
    1%

Technology dominates the sector allocation, comprising nearly 45% of the portfolio. This heavy concentration reflects a strong belief in the tech sector's growth potential but also exposes the portfolio to sector-specific risks. Other sectors such as financial services, consumer cyclicals, and healthcare provide some diversification, yet their combined weight is significantly lower. Investors should be mindful of the potential for sector rotation, where leadership in market performance can shift unexpectedly, impacting returns.

Regions Info

  • North America
    93%
  • Europe Developed
    3%
  • Asia Developed
    2%
  • Asia Emerging
    1%
  • Japan
    1%

Geographically, the portfolio is heavily skewed towards North America, with over 92% exposure. This concentration limits the benefits of international diversification, which can help mitigate risks associated with regional economic downturns. While the U.S. market has been a strong performer historically, relying too heavily on one region can increase vulnerability to local market fluctuations. Investors might explore adding more exposure to emerging markets or other regions to enhance geographic diversity.

Redundant positions Info

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

The portfolio includes highly correlated assets, particularly the Vanguard S&P 500 ETF and Vanguard Total World Stock Index Fund ETF Shares. This correlation suggests that these assets tend to move in tandem, offering limited diversification benefits. While correlation can be useful for understanding how assets interact, it also highlights potential inefficiencies in the portfolio. Reducing overlap by diversifying into less correlated assets can help manage risk and improve the portfolio's 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.

The portfolio's current allocation could be optimized using the Efficient Frontier, which aims to achieve the best possible risk-return ratio. This involves adjusting the weights of existing assets to maximize returns for a given level of risk. However, optimization should focus on reducing overlap and enhancing diversification rather than simply chasing higher returns. By reallocating towards a more balanced mix of assets, the portfolio can potentially achieve a more efficient risk-return profile without adding new investments.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.50%
  • VanEck Semiconductor ETF 0.40%
  • iShares Factors US Growth Style ETF 0.20%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total World Stock Index Fund ETF Shares 1.80%
  • Weighted yield (per year) 0.82%

The portfolio's overall dividend yield is relatively low at 0.82%, reflecting its growth focus. The Vanguard Total World Stock Index Fund ETF Shares offers the highest yield at 1.8%, while others, like the iShares Factors US Growth Style ETF, provide minimal income. Dividends can contribute to total returns, especially in volatile markets, by providing a steady income stream. Investors seeking higher income might consider reallocating a portion of the portfolio to dividend-focused assets, balancing growth and income.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • VanEck Semiconductor ETF 0.35%
  • iShares Factors US Growth Style ETF 0.25%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total World Stock Index Fund ETF Shares 0.07%
  • Weighted costs total (per year) 0.18%

The total expense ratio (TER) for the portfolio is 0.18%, which is relatively low and beneficial for long-term returns. Lower costs mean more of your investment is working for you instead of going towards fees. The Vanguard S&P 500 ETF is particularly cost-effective at 0.03%, while the VanEck Semiconductor ETF has the highest cost at 0.35%. Keeping an eye on costs is crucial, as even small differences can compound over time, impacting overall performance. Consider reviewing and optimizing costs regularly.

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