A growth-focused portfolio with high tech exposure and concentrated geographic risk

Report created on Jan 4, 2025

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

The portfolio is predominantly composed of ETFs and common stocks, with a significant 20.7% allocation to the Invesco QQQ Trust. This structure leans heavily towards growth-oriented assets, with a notable concentration in technology and large-cap stocks. Compared to a typical balanced portfolio, which might include bonds and other asset classes, this portfolio is heavily skewed towards equities. This composition suggests a focus on capital appreciation, but it may lack the diversification benefits that come with a more varied asset mix, potentially increasing risk during market downturns.

Growth Info

Historically, the portfolio has shown a strong CAGR of 10.01%, indicating robust growth over time. However, it has also experienced a significant maximum drawdown of -37.62%, highlighting its susceptibility to market volatility. This performance is consistent with growth-focused portfolios, which can achieve high returns but also face considerable risks. Comparing this to a benchmark like the S&P 500, which typically has lower volatility, suggests that while the portfolio can outperform in bull markets, it may suffer more during downturns.

Projection Info

The forward projection, utilizing Monte Carlo simulations, shows a wide range of potential outcomes, with a 5th percentile result of -94.88% and a 67th percentile of -1.15%. Monte Carlo simulations use historical data to predict future performance, but it's important to note that these are hypothetical scenarios. The simulations suggest that while there is potential for positive returns, there is also significant downside risk. Investors should consider whether they are comfortable with this level of uncertainty and adjust their strategies accordingly.

Asset classes Info

  • Stocks
    100%

The portfolio is overwhelmingly allocated to stocks, with 99.8% in this asset class. This heavy concentration in equities suggests a high-risk, high-reward approach, typical of growth portfolios. While this can lead to substantial capital gains, it also exposes the portfolio to greater volatility. Compared to a more diversified asset class allocation, which might include bonds or real estate, this lack of diversification could lead to increased risk during market downturns. Consideration could be given to incorporating other asset classes to balance risk and reward.

Sectors Info

  • Technology
    46%
  • Telecommunications
    15%
  • Consumer Discretionary
    12%
  • Industrials
    9%
  • Consumer Staples
    6%
  • Financials
    6%
  • Health Care
    3%
  • Utilities
    1%
  • Basic Materials
    1%
  • Energy
    1%

The portfolio has a significant 45.5% allocation in the technology sector, with other notable allocations in communication services and consumer cyclicals. This concentration in tech implies a potential for high growth but also increased volatility, especially during periods of economic uncertainty or rising interest rates. Compared to a more balanced sector distribution, this portfolio is less diversified, which might affect its stability. Investors might want to assess whether this sector focus aligns with their risk tolerance and consider diversification into other sectors.

Regions Info

  • North America
    93%
  • Europe Developed
    3%
  • Asia Emerging
    1%
  • Japan
    1%
  • Asia Developed
    1%

The geographic allocation is heavily weighted towards North America, with 93.4% exposure, leaving minimal allocation to other regions. This concentration increases vulnerability to regional economic downturns or policy changes. Compared to global benchmarks, which typically have more balanced geographic exposure, this portfolio might benefit from increased international diversification. Increasing exposure to emerging markets or other developed regions could provide additional growth opportunities and reduce geographic risk.

Redundant positions Info

  • Vanguard Russell 1000 Growth Index Fund ETF Shares
    SPDR S&P 500 ETF Trust
    Invesco QQQ Trust
    High correlation

The portfolio contains highly correlated assets, such as the Vanguard Russell 1000 Growth Index Fund ETF Shares, SPDR S&P 500 ETF Trust, and Invesco QQQ Trust. High correlation means these assets tend to move together, limiting diversification benefits. During market downturns, the portfolio may not have the buffer of uncorrelated assets to mitigate losses. Reducing these overlapping positions and introducing assets with lower correlation can enhance diversification and potentially improve 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.

The portfolio could be optimized using the Efficient Frontier, which helps identify the best possible risk-return ratio. Currently, the portfolio's focus on growth and high correlation among assets suggests room for improvement. By adjusting the allocation among existing assets, it may be possible to achieve a more efficient balance between risk and return. However, it's important to note that optimization is based on historical data and current assets, and does not guarantee future performance.

Dividends Info

  • Apple Inc 0.40%
  • Fidelity® MSCI Industrials Index ETF 0.90%
  • iShares Global Clean Energy ETF 0.80%
  • Magna International Inc 4.60%
  • Invesco QQQ Trust 0.60%
  • Defiance Quantum 0.60%
  • Invesco PHLX Semiconductor ETF 0.70%
  • SPDR S&P 500 ETF Trust 0.90%
  • Target Corporation 3.30%
  • Vanguard Russell 1000 Growth Index Fund ETF Shares 0.40%
  • Vanguard Total International Stock Index Fund ETF Shares 3.40%
  • Consumer Staples Select Sector SPDR® Fund 2.00%
  • Weighted yield (per year) 0.71%

The portfolio's total dividend yield is relatively low at 0.71%, reflecting its growth-oriented focus. While dividends can provide a steady income stream, this portfolio prioritizes capital appreciation over income. For investors seeking regular income, this yield may be insufficient. However, for those focused on growth, reinvesting dividends can contribute to compounding returns. Investors should evaluate whether this aligns with their income needs and consider adding higher-yielding assets if necessary.

Ongoing product costs Info

  • Fidelity® MSCI Industrials Index ETF 0.08%
  • iShares Global Clean Energy ETF 0.41%
  • iShares Cybersecurity and Tech ETF 0.47%
  • U.S. Global Jets ETF 0.60%
  • Invesco QQQ Trust 0.20%
  • Defiance Quantum 0.40%
  • Invesco PHLX Semiconductor ETF 0.19%
  • SPDR S&P 500 ETF Trust 0.10%
  • Vanguard Russell 1000 Growth Index Fund ETF Shares 0.08%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Consumer Staples Select Sector SPDR® Fund 0.09%
  • Weighted costs total (per year) 0.11%

The total expense ratio (TER) of the portfolio is impressively low at 0.11%, which is beneficial for long-term performance. Low costs mean more of your investment returns stay in your pocket, compounding over time. This aligns well with best practices for cost management in portfolio construction. Maintaining low costs is crucial, as high fees can erode returns significantly. Investors should continue to monitor costs and look for opportunities to replace higher-fee assets with more cost-effective alternatives.

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