A growth-focused portfolio with heavy tech exposure and low geographic diversification

Report created on Jan 14, 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 concentrated in U.S. equities, with a significant focus on large-cap stocks through ETFs like the Vanguard S&P 500 and Invesco NASDAQ 100. This composition aligns with a growth strategy, offering potential for high returns but also increased volatility. Compared to a typical balanced portfolio, there's a lack of diversification across asset classes, which might expose the investor to sector-specific risks. To enhance diversification, consider adding other asset types, such as bonds or international equities, to balance the risk-return profile.

Growth Info

Historically, the portfolio has delivered an impressive Compound Annual Growth Rate (CAGR) of 15.18%, indicating strong past performance. However, it also experienced a maximum drawdown of -28.42%, highlighting the potential for significant short-term losses. When compared to broad market indices, this performance suggests higher volatility typical of growth-focused portfolios. While past performance can provide insights, it's crucial to remember that it doesn't guarantee future results. Regular performance reviews can help align the portfolio with changing market conditions and personal goals.

Projection Info

Forward projections using Monte Carlo simulations suggest a favorable outlook, with an annualized return of 17.04% across simulations. The Monte Carlo method uses historical data to estimate potential future outcomes, but it's important to note that it can't predict exact results. With a 50th percentile outcome of 594.67%, the portfolio shows promise, yet the range of outcomes underscores the inherent risk. To better manage expectations, consider diversifying further to reduce potential volatility while still aiming for growth.

Asset classes Info

  • Stocks
    100%

The portfolio is overwhelmingly invested in stocks, with a staggering 99.86% allocation, leaving minimal room for other asset classes. This heavy stock weighting can lead to substantial gains in bull markets but also significant losses in downturns. Compared to a diversified portfolio that includes bonds or real estate, this allocation lacks balance. Introducing other asset classes can provide a cushion against market volatility and enhance overall portfolio stability, especially during turbulent economic periods.

Sectors Info

  • Technology
    43%
  • Consumer Discretionary
    10%
  • Financials
    9%
  • Industrials
    9%
  • Telecommunications
    7%
  • Health Care
    7%
  • Consumer Staples
    4%
  • Energy
    4%
  • Real Estate
    2%
  • Basic Materials
    2%
  • Utilities
    2%

Technology dominates the sector allocation, comprising over 43% of the portfolio, which is significantly higher than typical benchmark indices. While this sector offers substantial growth potential, it also comes with higher volatility, especially during interest rate hikes. Other sectors like consumer cyclicals and financial services have moderate representation. To mitigate sector-specific risks, consider rebalancing to achieve a more even distribution across various industries, ensuring resilience against sector downturns.

Regions Info

  • North America
    99%
  • Europe Developed
    1%

Geographically, the portfolio is heavily concentrated in North America, accounting for nearly 99% of the allocation. This lack of international exposure limits diversification and can increase vulnerability to regional economic shifts. Compared to global benchmarks, this is a significant underexposure to international markets. Expanding geographic diversification by including more assets from Europe, Asia, or emerging markets could reduce risk and provide opportunities for growth in different economic environments.

Redundant positions Info

  • Invesco NASDAQ 100 ETF
    Vanguard Information Technology Index Fund ETF Shares
    High correlation

The portfolio features highly correlated assets, particularly between the Invesco NASDAQ 100 ETF and Vanguard Information Technology Index Fund ETF Shares. High correlation means these assets tend to move in the same direction, which can limit diversification benefits during market downturns. While they may boost returns in a rising market, their similarity can increase risk. To enhance diversification, consider replacing one of these ETFs with assets that have lower correlation, thus improving the portfolio's risk management.

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 concept, which aims to achieve the best possible risk-return ratio. Currently, the portfolio's expected return is lower than the optimal portfolio's projected 17.79%. By adjusting the asset allocation, primarily reducing correlated assets, the portfolio can potentially achieve higher returns for the same level of risk. It's important to note that optimization focuses on risk-return balance, not necessarily diversification or income.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.60%
  • Invesco NASDAQ 100 ETF 0.60%
  • Vanguard Information Technology Index Fund ETF Shares 0.60%
  • Vanguard S&P 500 ETF 1.30%
  • Vanguard Mid-Cap Growth Index Fund ETF Shares 0.50%
  • Weighted yield (per year) 0.92%

The portfolio's dividend yield stands at 0.92%, which is relatively low, reflecting its growth orientation. Dividends can provide a steady income stream and reduce reliance on capital gains for returns. For investors seeking income, this yield might be insufficient. To enhance income potential, consider incorporating dividend-focused ETFs or stocks into the portfolio. This adjustment can provide a balanced approach, combining growth with a more predictable income stream.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Invesco NASDAQ 100 ETF 0.15%
  • Vanguard Information Technology Index Fund ETF Shares 0.10%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Mid-Cap Growth Index Fund ETF Shares 0.07%
  • Weighted costs total (per year) 0.09%

The portfolio's total expense ratio (TER) is impressively low at 0.09%, with individual ETF costs ranging from 0.03% to 0.25%. Low costs are a significant advantage, as they help maximize net returns over the long term. Compared to many actively managed funds, this cost structure is highly efficient. Maintaining low costs should remain a priority, but it's essential to ensure that cost-cutting doesn't compromise diversification or investment quality.

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