A high-risk growth-focused portfolio with technology concentration and minimal geographic diversification

Report created on Dec 9, 2024

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

1/5
Single-Focused
Less diversification More diversification

Positions

The portfolio is primarily composed of ETFs, with a strong emphasis on equities, making up nearly 80% of the allocation. Notably, there's a significant 15% allocation to a Bitcoin trust, which introduces a high level of volatility. This composition suggests a focus on growth, with a smaller allocation to bonds (5%) for some stability. Understanding the mix of assets is crucial as it dictates the risk and potential return profile. A high equity allocation typically means more risk and potential return, while bonds provide balance. Consider rebalancing towards more bonds if stability is desired, or further diversifying into other asset types to reduce risk.

Growth Info

The historical performance of the portfolio, with a hypothetical initial investment, shows a Compound Annual Growth Rate (CAGR) of 26.17%. However, this impressive return comes with significant risk, evidenced by a maximum drawdown of -82.28%. This means that at its worst, the portfolio lost over 80% of its value, highlighting its volatility. Historical performance can guide expectations but isn't predictive of future returns. Consider whether the high volatility aligns with your risk tolerance. If not, diversifying or increasing the bond allocation could help mitigate future drawdowns.

Projection Info

Monte Carlo simulations use historical data to project future outcomes, providing a range of potential returns. Here, simulations suggest a median return of 1,011.05% over time, indicating strong growth potential. However, projections are not guarantees, as they rely on past data that might not reflect future market conditions. The wide range of outcomes, from a 5th percentile of 32.85% to a 67th percentile of 1,889.29%, underscores the uncertainty. Regularly review and adjust the portfolio based on changing market conditions and personal circumstances to stay aligned with your goals.

Asset classes Info

  • Stocks
    80%
  • Other
    15%
  • Bonds
    5%

The portfolio's asset class allocation is heavily skewed towards stocks, with minimal exposure to bonds and other asset classes. This lack of diversification across asset classes can lead to increased risk, especially during market downturns. Diversification helps spread risk and smooth returns over time. A more balanced allocation that includes bonds or alternative investments could provide a cushion against equity market volatility. Consider increasing bond exposure or exploring other asset classes like real estate or commodities for greater diversification.

Sectors Info

  • Technology
    32%
  • Financials
    9%
  • Consumer Discretionary
    8%
  • Industrials
    8%
  • Health Care
    7%
  • Telecommunications
    5%
  • Consumer Staples
    4%
  • Energy
    3%
  • Real Estate
    2%
  • Basic Materials
    2%
  • Utilities
    1%

Technology is the dominant sector in this portfolio, accounting for nearly 32% of the allocation. While technology stocks have historically offered strong growth, they can also be highly volatile. Overexposure to one sector can lead to increased risk if that sector underperforms. A more balanced sector allocation can reduce risk and improve long-term performance. Consider reducing technology exposure and reallocating to underrepresented sectors like utilities or consumer staples for a more balanced approach.

Regions Info

  • North America
    79%

The geographic allocation is heavily concentrated in North America, with over 79% exposure, and minimal investment in other regions. This limited geographic diversification can increase vulnerability to regional economic downturns. Geographic diversification can reduce risk by spreading investments across different economic environments. Consider increasing exposure to emerging markets or developed economies outside North America to capture growth opportunities and reduce regional risk.

Redundant positions Info

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

The portfolio contains several highly correlated assets, particularly among large-cap and growth-focused ETFs. When assets move together, they don't provide diversification benefits, which can lead to higher portfolio risk. Diversification through low-correlation assets can help reduce volatility and improve risk-adjusted returns. Consider replacing some highly correlated ETFs with those that have lower correlation to enhance diversification. This could involve adding assets from different sectors or geographic regions.

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 seeks the best risk-return ratio. This involves adjusting the weights of current assets to achieve maximum returns for a given level of risk. However, optimization doesn't guarantee diversification or align with all investment goals. Focus on reducing the overlap of highly correlated assets first, then explore rebalancing to achieve a more efficient portfolio. This process can help ensure that you're getting the most out of your current investments.

Dividends Info

  • Vanguard Total Bond Market Index Fund ETF Shares 3.60%
  • Schwab U.S. Dividend Equity ETF 2.50%
  • Vanguard Small-Cap Index Fund ETF Shares 1.30%
  • Vanguard Information Technology Index Fund ETF Shares 0.60%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard S&P 500 Growth Index Fund ETF Shares 0.60%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.20%
  • Vanguard Growth Index Fund ETF Shares 0.50%
  • Weighted yield (per year) 1.17%

The portfolio's overall dividend yield is 1.17%, with contributions from several ETFs focused on dividend-paying stocks. Dividends can provide a steady income stream and help cushion against market volatility. While the yield is modest, it can still contribute to total returns, especially in a growth-focused portfolio. Consider increasing exposure to higher-yielding assets if income is a priority. However, balance this with growth objectives to maintain alignment with your investment goals.

Ongoing product costs Info

  • Vanguard Total Bond Market Index Fund ETF Shares 0.03%
  • Grayscale Bitcoin Trust (BTC) 1.50%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • Vanguard Small-Cap Index Fund ETF Shares 0.05%
  • Vanguard Information Technology Index Fund ETF Shares 0.10%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard S&P 500 Growth Index Fund ETF Shares 0.10%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Vanguard Growth Index Fund ETF Shares 0.04%
  • Weighted costs total (per year) 0.28%

The total expense ratio (TER) of the portfolio is 0.28%, with the Grayscale Bitcoin Trust contributing the highest cost at 1.5%. High costs can erode returns over time, so keeping them low is crucial for long-term success. While the overall TER is reasonable, reducing costs can further enhance returns. Consider replacing high-cost assets with lower-cost alternatives to improve net performance. Regularly review and compare the fees of existing and potential investments to ensure cost-effectiveness.

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