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Growth-Oriented Portfolio with Strong Tech Focus and Low Diversification in US Market

Report created on Jul 13, 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 emphasis on growth-oriented investments. The largest holding is the Vanguard S&P 500 Growth Index Fund ETF, making up 40.05% of the portfolio, followed by the Vanguard Information Technology Index Fund ETF at 30.21%. Other notable positions include the Invesco S&P 500 GARP ETF and the Invesco S&P MidCap Momentum ETF. The portfolio is predominantly invested in stocks, with a small cash allocation. This composition indicates a focus on capital appreciation with minimal diversification, primarily within the US market.

Growth Info

Historically, the portfolio has exhibited strong performance with a compound annual growth rate (CAGR) of 18.62%. However, it also experienced a maximum drawdown of -33.92%, indicating significant volatility. The returns are concentrated, with 90% of them occurring over just 24 days. This suggests that while the portfolio has the potential for high returns, it is also susceptible to large swings in value. Investors should be prepared for this level of risk and consider whether they are comfortable with the potential for substantial short-term losses.

Projection Info

A forward projection using a Monte Carlo simulation, which models a wide range of possible outcomes, indicates that the portfolio could see an annualized return of 20.56%. With 1,000 simulations, the 5th percentile outcome shows a return of 65.92%, while the median (50th percentile) projects an 804.14% return. This suggests a high potential for growth, but also a wide range of possible outcomes. Investors should be aware of the inherent uncertainty and ensure their risk tolerance aligns with this potential variability.

Asset classes Info

  • Stocks
    100%

The portfolio is almost entirely composed of stocks, accounting for 99.8% of the assets, with negligible allocations in cash and other asset classes. This heavy stock allocation aligns with a growth investment strategy but lacks the diversification benefits that bonds or other asset classes might offer. To mitigate risk, investors might consider incorporating other asset classes to balance the portfolio. This could help reduce volatility and provide more stable returns over time, depending on individual risk tolerance and investment goals.

Sectors Info

  • Technology
    55%
  • Consumer Discretionary
    10%
  • Industrials
    8%
  • Financials
    8%
  • Telecommunications
    6%
  • Energy
    5%
  • Health Care
    4%
  • Consumer Staples
    2%
  • Basic Materials
    2%
  • Real Estate
    1%
  • Utilities
    1%

The portfolio is heavily concentrated in the technology sector, which comprises 54.92% of the total allocation. Other sectors like consumer cyclicals, industrials, and financial services are present but with much smaller allocations. This concentration in technology can lead to high growth potential but also increases vulnerability to sector-specific risks. Investors should assess whether this level of concentration aligns with their risk appetite and consider diversifying into other sectors to mitigate potential downturns in the tech industry.

Regions Info

  • North America
    89%
  • Europe Developed
    1%

Geographically, the portfolio is overwhelmingly focused on North America, with 89.44% of assets allocated there. Minimal exposure to Europe, Asia, Latin America, and other regions indicates a lack of international diversification. While a strong focus on the US market can capitalize on its growth, it also exposes the portfolio to regional economic and political risks. Investors may benefit from expanding their geographic allocation to include more international markets, which could provide diversification benefits and reduce the impact of US-specific downturns.

Redundant positions Info

  • Invesco S&P 500 GARP ETF
    Invesco S&P MidCap Momentum ETF
    Vanguard Mid-Cap Index Fund ETF Shares
    High correlation
  • Vanguard Information Technology Index Fund ETF Shares
    Vanguard S&P 500 Growth Index Fund ETF Shares
    High correlation

The portfolio contains several highly correlated assets, particularly among the Invesco S&P 500 GARP ETF, Invesco S&P MidCap Momentum ETF, and Vanguard Mid-Cap Index Fund ETF Shares. Similarly, the Vanguard Information Technology Index Fund ETF and Vanguard S&P 500 Growth Index Fund ETF Shares are closely correlated. High correlation means these assets tend to move in the same direction, offering limited diversification benefits. Reducing holdings in these overlapping assets could help achieve a more balanced portfolio, potentially improving risk-adjusted returns.

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.

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Before optimizing the portfolio, addressing the high correlation between certain assets is crucial. By removing overlapping assets, the portfolio can achieve better diversification. Once this is done, investors can consider moving along the efficient frontier to adjust their risk exposure. For a riskier portfolio, increasing exposure to high-growth sectors might be an option. Conversely, to make the portfolio more conservative, incorporating bonds or other low-risk assets could be beneficial. This strategic adjustment can help align the portfolio with individual risk preferences and financial goals.

Dividends Info

  • Amplify Transformational Data Sharing ETF 0.70%
  • Invesco S&P 500 GARP ETF 1.30%
  • Vanguard Information Technology Index Fund ETF Shares 0.60%
  • Vanguard Mid-Cap Index Fund ETF Shares 1.80%
  • Vanguard S&P 500 Growth Index Fund ETF Shares 0.60%
  • Invesco S&P MidCap Momentum ETF 0.30%
  • Weighted yield (per year) 0.73%

The portfolio's overall dividend yield is relatively low at 0.73%, reflecting its focus on growth rather than income. The Vanguard Mid-Cap Index Fund ETF offers the highest yield at 1.8%, while other holdings provide modest dividends. For investors seeking income generation, this portfolio may not be ideal. However, those prioritizing capital appreciation may find the growth potential appealing. If income is a consideration, incorporating higher-yielding assets could enhance the portfolio's income-generating capacity without sacrificing growth prospects.

Ongoing product costs Info

  • Amplify Transformational Data Sharing ETF 0.76%
  • Invesco S&P 500 GARP ETF 0.34%
  • Vanguard Information Technology Index Fund ETF Shares 0.10%
  • Vanguard Mid-Cap Index Fund ETF Shares 0.04%
  • Vanguard S&P 500 Growth Index Fund ETF Shares 0.10%
  • Invesco S&P MidCap Momentum ETF 0.34%
  • Weighted costs total (per year) 0.16%

The portfolio's total expense ratio (TER) is 0.16%, which is quite competitive. The Vanguard ETFs contribute to this low cost, with expense ratios as low as 0.04%. However, the Amplify Transformational Data Sharing ETF has a higher expense ratio of 0.76%, which could be a drag on overall performance. Keeping costs low is crucial for maximizing returns, so investors should regularly review expense ratios and consider lower-cost alternatives if available. This approach can help enhance net returns over the long term, aligning with cost-effective investment principles.

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