A growth-focused portfolio with high tech concentration and low geographic diversity

Report created on Jan 9, 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 four ETFs, with a significant focus on growth and technology sectors. Each ETF holds a substantial portion of the portfolio, resulting in a low diversity score. This composition may not align with common benchmarks, which typically include a broader array of sectors and asset classes. To improve diversification, consider incorporating a wider range of asset types and sectors. This can help mitigate risks associated with market volatility and sector-specific downturns, providing a more balanced investment approach.

Growth Info

Historically, the portfolio has shown impressive performance with a Compound Annual Growth Rate (CAGR) of 18.02%. However, it also experienced a significant maximum drawdown of -33.73%, indicating vulnerability to market downturns. While past performance is not indicative of future results, understanding these trends can help manage expectations. To balance growth with stability, consider diversifying into less volatile assets that can cushion against significant losses during market corrections, ensuring a more resilient portfolio.

Projection Info

Forward projections using Monte Carlo simulations suggest a wide range of potential outcomes, with a median return of 799.04%. Monte Carlo analysis uses historical data to simulate future performance, highlighting both potential gains and risks. However, it's important to remember that these simulations are not guarantees. To prepare for various market conditions, consider adjusting allocations to include assets with different risk profiles. This can help achieve a more stable return across different market scenarios, aligning with long-term investment goals.

Asset classes Info

  • Stocks
    100%

The portfolio is overwhelmingly invested in stocks, with a negligible allocation to cash, limiting asset class diversification. This heavy reliance on equities aligns with a growth-focused strategy but may increase risk during market downturns. Common benchmarks typically include a mix of stocks, bonds, and other asset classes to balance risk and return. To enhance diversification, consider introducing bonds or other fixed-income assets, which can provide stability and income, especially during periods of stock market volatility.

Sectors Info

  • Technology
    63%
  • Consumer Discretionary
    10%
  • Telecommunications
    8%
  • Financials
    5%
  • Health Care
    5%
  • Industrials
    3%
  • Consumer Staples
    2%
  • Energy
    1%
  • Basic Materials
    1%
  • Real Estate
    1%
  • Utilities
    1%

The portfolio is heavily weighted towards technology, making up over 63% of the allocation, with other sectors such as consumer cyclicals and communication services also represented. This concentration can lead to higher volatility, especially during periods of tech market fluctuations. While technology has driven recent growth, diversifying into other sectors can provide a buffer against sector-specific risks. Consider gradually increasing exposure to underrepresented sectors to achieve a more balanced and resilient portfolio.

Regions Info

  • North America
    100%

Geographic allocation is heavily skewed towards North America, with minimal exposure to international markets. This lack of geographic diversity may limit potential growth opportunities and increase vulnerability to regional economic downturns. Common benchmarks often include a more balanced global allocation. To enhance global diversification, consider incorporating investments from other developed and emerging markets. This can help capture growth opportunities worldwide and reduce reliance on the performance of a single region.

Redundant positions Info

  • Vanguard S&P 500 Growth Index Fund ETF Shares
    Vanguard S&P 500 ETF
    Vanguard Growth Index Fund ETF Shares
    Vanguard Information Technology Index Fund ETF Shares
    High correlation

The assets in the portfolio are highly correlated, particularly the growth-focused ETFs, which move in tandem with each other. This high correlation can limit the benefits of diversification, as similar assets may react similarly during market downturns. To reduce overall portfolio risk, consider adding assets with low correlation to existing holdings. This can enhance diversification, providing a more stable return profile by reducing the impact of any single asset's performance on the entire portfolio.

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 to improve its risk-return ratio using the Efficient Frontier concept. This involves adjusting the allocation of current assets to achieve the best possible balance between risk and return. However, optimization should not be confused with diversification, as it focuses solely on maximizing returns for a given level of risk. Consider reviewing asset allocation strategies to ensure the portfolio is operating at its most efficient point, balancing growth with manageable risk.

Dividends Info

  • Vanguard Information Technology Index Fund ETF Shares 0.60%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard S&P 500 Growth Index Fund ETF Shares 0.30%
  • Vanguard Growth Index Fund ETF Shares 0.50%
  • Weighted yield (per year) 0.57%

The portfolio's dividend yield is relatively low at 0.57%, reflecting its focus on growth rather than income generation. While dividends can provide a steady income stream, growth-focused portfolios prioritize capital appreciation. For investors seeking higher income, consider adding dividend-paying stocks or funds to balance growth with income generation. This can provide cash flow, especially during periods of market volatility, while still maintaining exposure to growth opportunities.

Ongoing product costs Info

  • Vanguard Information Technology Index Fund ETF Shares 0.10%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard S&P 500 Growth Index Fund ETF Shares 0.10%
  • Vanguard Growth Index Fund ETF Shares 0.04%
  • Weighted costs total (per year) 0.07%

The portfolio's total expense ratio (TER) is impressively low at 0.07%, which supports long-term performance by minimizing costs. Low costs are a significant advantage, as they allow more of the portfolio's returns to be reinvested. While the current cost structure is efficient, continue to monitor fees and consider lower-cost alternatives if available. This proactive approach can further enhance long-term returns, ensuring that the portfolio remains cost-effective and competitive.

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