A growth-focused portfolio with a high concentration in U.S. technology stocks

Report created on Apr 8, 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 weighted towards U.S. stocks, with a significant emphasis on technology. The Vanguard Total Stock Market Index Fund ETF dominates at 50%, followed by the Vanguard S&P 500 ETF at 30%. The remaining 20% is split equally between two tech-focused ETFs. This composition suggests a strong focus on growth, but with limited diversification across asset classes. While this allocation aligns with a growth profile, it may expose the portfolio to sector-specific risks, particularly in technology. To enhance diversification, consider adding non-U.S. equities or other asset classes like bonds.

Growth Info

Historically, the portfolio has performed well, with a Compound Annual Growth Rate (CAGR) of 14.05%. This impressive growth rate indicates a robust return on investment over time, particularly during favorable market conditions. However, the maximum drawdown of -33.69% highlights potential volatility, especially during market downturns. This performance underscores the importance of understanding the risk involved with higher returns. It's essential to weigh the potential for high returns against the possibility of significant losses. Diversifying into less volatile assets could help mitigate drawdowns.

Projection Info

The Monte Carlo simulation, which uses historical data to predict future outcomes, shows promising potential for this portfolio. With a median projection of 601.6% growth, the outlook is optimistic. However, it's important to remember that these simulations are based on historical data, which may not predict future performance accurately. The simulation shows a wide range of outcomes, emphasizing the inherent uncertainty in investing. Investors should prepare for variability and consider strategies to manage risk, such as diversifying across more asset classes or regions.

Asset classes Info

  • Stocks
    100%

The portfolio is entirely composed of stocks, which can drive growth but may also increase risk. This lack of diversification across asset classes means the portfolio is heavily reliant on equity markets' performance. In comparison to benchmarks that include a mix of asset types, this portfolio may experience higher volatility. To address this, consider introducing fixed-income securities or other asset classes. Doing so can provide a buffer during equity market downturns and potentially smooth out returns over time, aligning with a more balanced investment strategy.

Sectors Info

  • Technology
    42%
  • Financials
    12%
  • Consumer Discretionary
    10%
  • Health Care
    9%
  • Telecommunications
    8%
  • Industrials
    7%
  • Consumer Staples
    4%
  • Energy
    3%
  • Real Estate
    2%
  • Utilities
    2%
  • Basic Materials
    1%

Sector-wise, the portfolio is concentrated in technology, making up 42% of the total. This concentration aligns with the growth objective but may expose the portfolio to sector-specific risks, especially if technology experiences downturns. In comparison to common benchmarks, this allocation is tech-heavy, which can lead to higher volatility. To mitigate this risk, consider reallocating a portion of the investment to underrepresented sectors like healthcare or consumer staples. Such diversification can help stabilize returns and reduce the impact of sector-specific downturns.

Regions Info

  • North America
    99%

Geographically, the portfolio is almost entirely focused on North America, with 99% exposure. This lack of international diversification can increase vulnerability to U.S. market-specific risks. Compared to benchmarks with more global exposure, this portfolio may miss out on growth opportunities in emerging and developed markets outside the U.S. To enhance geographic diversification, consider adding international equities. This can help spread risk across different economic environments and potentially capture growth in regions experiencing economic expansion.

Market capitalization Info

  • Mega-cap
    45%
  • Large-cap
    31%
  • Mid-cap
    18%
  • Small-cap
    4%
  • Micro-cap
    1%

The portfolio's market capitalization is skewed towards larger companies, with 45% in mega-caps and 31% in big caps. While this focus on large-cap stocks can provide stability and established growth, it may limit exposure to the higher growth potential of smaller companies. In comparison to more balanced benchmarks, this allocation leans towards stability over aggressive growth. To diversify, consider increasing exposure to small and mid-cap stocks, which can offer high-growth opportunities and complement the stability provided by larger companies.

Redundant positions Info

  • Vanguard Information Technology Index Fund ETF Shares
    iShares Evolved U.S. Technology ETF
    High correlation
  • Vanguard Total Stock Market Index Fund ETF Shares
    Vanguard S&P 500 ETF
    High correlation

The portfolio contains highly correlated assets, particularly between the technology ETFs and the broad market ETFs. This correlation indicates that these assets tend to move together, which can limit diversification benefits. During market downturns, highly correlated assets may not provide the risk mitigation typically expected from diversification. To improve diversification, consider replacing or reducing holdings in overlapping ETFs with those that have lower correlation. This can help manage risk and enhance the portfolio's resilience against market fluctuations.

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's current allocation can be optimized using the Efficient Frontier, which identifies the best possible risk-return ratio for a given set of assets. However, the presence of highly correlated assets reduces the potential benefits of optimization. By adjusting the allocation to reduce overlap and increase diversification, the portfolio can achieve a more efficient risk-return profile. This process involves reallocating existing assets rather than introducing new ones, focusing on achieving the best balance between risk and return based on current holdings.

Dividends Info

  • iShares Evolved U.S. Technology ETF 0.40%
  • Vanguard Information Technology Index Fund ETF Shares 0.70%
  • Vanguard S&P 500 ETF 1.50%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.50%
  • Weighted yield (per year) 1.31%

The portfolio's total dividend yield is 1.31%, with the highest contributions from the Vanguard S&P 500 ETF and the Vanguard Total Stock Market Index Fund ETF. While dividends provide a steady income stream, the portfolio's focus on growth implies a secondary role for dividends. For investors seeking income, this yield may not be sufficient. If income is a priority, consider reallocating to higher-yielding assets or dividend-focused funds. Balancing growth and income can help meet various financial goals, depending on the investor's preferences.

Ongoing product costs Info

  • iShares Evolved U.S. Technology ETF 0.18%
  • Vanguard Information Technology Index Fund ETF Shares 0.10%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Weighted costs total (per year) 0.05%

The portfolio's total expense ratio (TER) is impressively low at 0.05%, which is beneficial for long-term returns. Lower costs mean more of your investment returns remain in your portfolio, compounding over time. This cost efficiency aligns well with best practices in portfolio management, ensuring that fees do not significantly erode returns. Maintaining this low-cost structure is advantageous, but be cautious of potential changes in fund fees. Regularly reviewing expense ratios can help ensure that the portfolio remains cost-effective and competitive.

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