A growth-focused portfolio with a technology bias and low geographic diversification

Report created on Dec 18, 2024

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 towards ETFs, focusing primarily on U.S. equities with a significant emphasis on technology and growth sectors. This composition suggests a strategy aimed at capitalizing on market momentum and growth opportunities. However, the high concentration in a few sectors and regions might expose the portfolio to specific risks. Diversifying across more asset classes and regions could help mitigate these risks. Consideration should be given to introducing non-correlated assets, such as bonds or other fixed-income securities, to balance the portfolio's risk profile.

Growth Info

Historically, the portfolio has shown strong performance with a compound annual growth rate (CAGR) of 20.87%. This impressive growth is tempered by a maximum drawdown of -27.11%, indicating potential volatility. It’s crucial to remember that past performance doesn’t guarantee future results, as market conditions can change. Understanding these trends helps investors gauge potential risks and rewards. Balancing high-growth assets with more stable investments could help manage volatility while striving for robust returns. Regularly reviewing historical performance can guide adjustments to align with evolving market conditions and personal financial goals.

Projection Info

Monte Carlo simulations offer a glimpse into potential future performance by using historical data to model various outcomes. In this case, 1,000 simulations suggest a wide range of potential returns, with an annualized return of 24.28%. The median outcome projects a significant increase, highlighting the portfolio's growth potential. However, the inherent limitation of these simulations is their reliance on historical data, which may not fully predict future market dynamics. Investors should use these projections as a guide rather than a guarantee, maintaining 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 position. This heavy stock allocation can lead to high returns in bull markets but also increases vulnerability to market downturns. Diversification across different asset classes, such as bonds or real estate, can provide stability and reduce risk. Including a mix of asset classes helps smooth out returns over time, protecting against sector-specific downturns. Investors should evaluate their risk tolerance and consider rebalancing to include a broader range of asset classes to achieve a more balanced risk-return profile.

Sectors Info

  • Technology
    45%
  • Financials
    14%
  • Consumer Discretionary
    11%
  • Industrials
    8%
  • Telecommunications
    6%
  • Health Care
    5%
  • Energy
    4%
  • Consumer Staples
    4%
  • Basic Materials
    2%
  • Utilities
    1%

Technology dominates the sector allocation, accounting for nearly 45% of the portfolio. While this concentration can drive growth during tech sector booms, it also increases exposure to sector-specific risks. A more balanced sector allocation could enhance diversification and reduce volatility. Exploring opportunities in underrepresented sectors like healthcare or consumer defensives might provide stability and potential growth. By diversifying across various sectors, investors can mitigate risks associated with sector-specific downturns and capture growth opportunities across different market environments.

Regions Info

  • North America
    96%
  • Asia Developed
    2%
  • Europe Developed
    1%

The portfolio is predominantly exposed to North American markets, with over 96% of assets allocated to this region. While this focus can benefit from strong local market performance, it limits exposure to international growth opportunities. Geographic diversification can reduce risk by spreading investments across various economic environments. Including assets from Europe, Asia, and emerging markets might provide new growth avenues and hedge against regional downturns. Investors should consider broadening their geographic exposure to enhance diversification and capitalize on global economic trends.

Redundant positions Info

  • Invesco NASDAQ 100 ETF
    Vanguard Information Technology Index Fund ETF Shares
    Schwab U.S. Large-Cap Growth ETF
    High correlation

The portfolio contains highly correlated assets, particularly within the technology sector, which can amplify risk during market downturns. Correlation measures how assets move in relation to each other, and high correlation suggests that these assets may not provide effective diversification. By reducing reliance on correlated assets and introducing non-correlated investments, the portfolio can achieve better risk management. Evaluating the correlation of current holdings and considering alternative investments can enhance portfolio resilience against market volatility.

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, which identifies the best possible risk-return ratio based on current holdings. By reallocating investments among existing assets, investors can potentially enhance returns without increasing risk. This process involves analyzing the risk-return trade-offs of each asset and adjusting allocations accordingly. However, optimization is constrained by the current asset pool, and diversification benefits may still be limited. Continual assessment and adjustment are key to maintaining an optimized portfolio that aligns with evolving financial goals.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.10%
  • Invesco NASDAQ 100 ETF 0.40%
  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • Invesco S&P 500® Momentum ETF 0.30%
  • Vanguard Information Technology Index Fund ETF Shares 0.60%
  • Weighted yield (per year) 0.53%

The overall dividend yield of the portfolio is modest at 0.53%, reflecting its growth-oriented nature. While dividends provide a steady income stream, this portfolio prioritizes capital appreciation over income generation. Investors seeking income may consider reallocating some funds to higher-yielding assets. Balancing growth and income can create a more stable financial foundation, particularly for those closer to retirement. Regularly assessing dividend yields and income needs can help maintain alignment with financial goals and lifestyle changes.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Invesco NASDAQ 100 ETF 0.15%
  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • VanEck Semiconductor ETF 0.35%
  • Invesco S&P 500® Momentum ETF 0.13%
  • Vanguard Information Technology Index Fund ETF Shares 0.10%
  • Weighted costs total (per year) 0.17%

The portfolio's total expense ratio (TER) is 0.17%, which is relatively low and beneficial for long-term performance. Lower costs mean more of the returns are retained by the investor, enhancing compounding over time. However, it's essential to remain vigilant about fees, as they can erode gains. Comparing the expense ratios of existing holdings with alternatives can uncover opportunities to reduce costs further. Keeping an eye on fees and seeking cost-effective investment options can significantly improve net returns over the long haul.

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