A tech-heavy growth portfolio with high risk and low geographic diversification

Report created on Dec 9, 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 ETFs with a significant focus on the technology sector. The Vanguard S&P 500 ETF comprises 30% of the holdings, while the Invesco NASDAQ 100 ETF and Schwab U.S. Large-Cap Growth ETF each make up 20%. The Vanguard Information Technology Index Fund ETF Shares also hold a 20% share, and the VanEck Semiconductor ETF rounds out the portfolio with 10%. This composition suggests a strong emphasis on growth-oriented investments, primarily through large-cap U.S. stocks. However, the lack of diversification across different asset classes could expose the portfolio to sector-specific risks.

Growth Info

Historically, this portfolio has demonstrated impressive performance with a compound annual growth rate (CAGR) of 18.91%. This figure suggests that a hypothetical initial investment would have grown significantly over time. However, it is essential to note the max drawdown of -32.96%, indicating potential vulnerability during market downturns. While past performance can provide insights, it does not guarantee future results, and investors should be prepared for periods of volatility. Diversifying across additional asset classes might help mitigate such risks in the future.

Projection Info

The Monte Carlo simulation, which uses historical data to project potential outcomes, suggests a wide range of future portfolio values. The median projection is an impressive 1,141.33% return, with 997 out of 1,000 simulations showing positive returns. This analysis highlights the portfolio's potential for significant growth, but also underscores the inherent uncertainty in projections. Investors should consider these projections as one of many tools to gauge future performance, while acknowledging that real-world conditions can differ from historical trends.

Asset classes Info

  • Stocks
    100%

With nearly 100% of the portfolio allocated to stocks, it lacks diversification across asset classes. Such a concentration can amplify both gains and losses, as it is heavily reliant on the performance of the equity market. Diversification into other asset classes, such as bonds or real estate, could potentially reduce volatility and provide a more balanced risk-return profile. By spreading investments across different types of assets, the portfolio could better withstand market fluctuations and achieve more stable returns over time.

Sectors Info

  • Technology
    60%
  • Telecommunications
    8%
  • Consumer Discretionary
    8%
  • Health Care
    7%
  • Financials
    5%
  • Industrials
    4%
  • Consumer Staples
    3%
  • Energy
    1%
  • Basic Materials
    1%
  • Utilities
    1%
  • Real Estate
    1%

The portfolio's sector allocation is heavily skewed towards technology, which accounts for nearly 60% of the holdings. This concentration could lead to significant risk exposure if the technology sector experiences a downturn. Other sectors, such as communication services and consumer cyclicals, have minimal representation, which limits the portfolio's ability to benefit from growth in these areas. A more balanced sector allocation could enhance diversification and reduce sector-specific risks, potentially leading to more consistent performance across varying market conditions.

Regions Info

  • North America
    97%
  • Asia Developed
    1%
  • Europe Developed
    1%

Geographically, the portfolio is overwhelmingly concentrated in North America, with 97.15% of assets allocated to this region. This limited exposure to international markets can increase vulnerability to regional economic changes and miss out on growth opportunities in other parts of the world. Expanding geographic diversification by including assets from Europe, Asia, and emerging markets could help mitigate regional risks and tap into global growth trends, offering a more robust investment strategy.

Redundant positions Info

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

The portfolio's assets exhibit high correlation, particularly among the Schwab U.S. Large-Cap Growth ETF, Invesco NASDAQ 100 ETF, and Vanguard Information Technology Index Fund ETF Shares. This correlation means that these assets tend to move in the same direction, reducing the diversification benefits within the portfolio. By identifying and potentially replacing highly correlated assets with those that have lower correlations, the portfolio could achieve better risk management and reduce the impact of 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 potentially be optimized using the Efficient Frontier, which seeks the best possible risk-return ratio. Currently, the portfolio's expected return is below the optimal level of 19.91%, suggesting room for improvement. By adjusting the allocation of existing assets, investors could achieve a more efficient portfolio without necessarily increasing risk. However, optimization should be approached with caution, as it relies on historical data and assumptions that may not hold in future market conditions.

Dividends Info

  • Invesco NASDAQ 100 ETF 0.60%
  • Schwab U.S. Large-Cap Growth ETF 0.30%
  • VanEck Semiconductor ETF 0.40%
  • Vanguard Information Technology Index Fund ETF Shares 0.60%
  • Vanguard S&P 500 ETF 1.20%
  • Weighted yield (per year) 0.70%

The portfolio's overall dividend yield is relatively low at 0.7%, reflecting its focus on growth rather than income generation. While dividends can provide a steady income stream, growth-focused portfolios often prioritize capital appreciation. Investors seeking regular income may want to consider increasing exposure to dividend-paying stocks or funds. However, it's crucial to balance the desire for income with the portfolio's overall growth objectives, ensuring that any adjustments align with long-term investment goals.

Ongoing product costs Info

  • Invesco NASDAQ 100 ETF 0.15%
  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • VanEck Semiconductor ETF 0.35%
  • Vanguard Information Technology Index Fund ETF Shares 0.10%
  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.10%

The portfolio's total expense ratio (TER) is 0.1%, which is relatively low and suggests cost-efficient management. Lower costs can significantly enhance long-term returns, as they leave more capital to be reinvested. However, the VanEck Semiconductor ETF has a higher expense ratio of 0.35%, which could be reviewed to see if there are more cost-effective alternatives. Regularly assessing and minimizing investment costs can contribute to improved portfolio performance over time.

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