High-growth US-focused portfolio with significant tech exposure and low diversification

Report created on Jan 5, 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 ETFs, with a substantial 36.5% in the iShares Core S&P 500 ETF and 29.8% in the Vanguard Total Stock Market Index Fund ETF Shares. These two funds cover a broad range of US equities, providing a solid foundation. However, the concentration in just four ETFs, particularly with a 23.3% allocation to the Invesco NASDAQ 100 ETF and 10.4% to the Vanguard Information Technology Index Fund ETF Shares, indicates a tech-heavy focus. While this setup can drive growth, it lacks diversification across asset classes and regions, potentially increasing volatility.

Growth Info

Historically, the portfolio has delivered an impressive CAGR of 15.8%, highlighting its strong performance. However, it has also experienced a significant maximum drawdown of -28.17%, reflecting its higher risk nature. The concentration in high-growth sectors like technology can lead to substantial gains but may also result in steep declines during market downturns. Comparing this to benchmarks, the performance is commendable, but the volatility is noteworthy. Investors should be prepared for potential ups and downs, ensuring they are comfortable with the risk level.

Projection Info

The Monte Carlo simulation, which uses historical data to predict future outcomes, suggests a wide range of potential returns. With a median return of 671.8% and a 5th percentile return of 124.6%, the portfolio has a high probability of positive outcomes, with 997 out of 1,000 simulations showing gains. While this is encouraging, it is crucial to remember that past data cannot guarantee future results. Investors should consider potential economic changes and market conditions that may impact these projections.

Asset classes Info

  • Stocks
    100%

The portfolio is overwhelmingly concentrated in stocks, accounting for 99.79% of the allocation, with a negligible 0.21% in cash. This lack of diversification across asset classes means the portfolio is highly sensitive to equity market fluctuations. While equities can offer high returns, the absence of bonds or other asset classes may increase volatility. Investors might consider diversifying into other asset classes to reduce risk and enhance stability, especially during market downturns.

Sectors Info

  • Technology
    44%
  • Consumer Discretionary
    11%
  • Telecommunications
    10%
  • Financials
    9%
  • Health Care
    8%
  • Industrials
    6%
  • Consumer Staples
    5%
  • Energy
    2%
  • Utilities
    2%
  • Real Estate
    2%
  • Basic Materials
    2%

The portfolio's sector allocation is heavily skewed towards technology, making up 43.54% of the total. While technology has been a strong performer in recent years, this concentration increases exposure to sector-specific risks, such as regulatory changes or tech downturns. Other sectors, like Consumer Cyclicals and Financial Services, are present but underweighted compared to benchmarks. Broadening sector exposure could enhance diversification and reduce reliance on technology for returns, potentially stabilizing the portfolio during tech sector volatility.

Regions Info

  • North America
    99%
  • Europe Developed
    1%

Geographically, the portfolio is almost entirely focused on North America, with 99.03% of its allocation there. This heavy concentration limits exposure to international markets and may miss opportunities in other regions. While the US market has been strong, diversifying geographically could help mitigate risks associated with regional economic downturns. Expanding exposure to developed and emerging markets could provide additional growth opportunities and enhance the portfolio's resilience against regional volatility.

Redundant positions Info

  • Vanguard Total Stock Market Index Fund ETF Shares
    iShares Core S&P 500 ETF
    High correlation
  • Vanguard Information Technology Index Fund ETF Shares
    Invesco NASDAQ 100 ETF
    High correlation

The portfolio contains highly correlated assets, particularly between the Vanguard Total Stock Market Index Fund ETF Shares and the iShares Core S&P 500 ETF, as well as the Vanguard Information Technology Index Fund ETF Shares and the Invesco NASDAQ 100 ETF. High correlation means these assets tend to move in similar directions, limiting diversification benefits. Reducing overlap by selecting uncorrelated assets can improve diversification and potentially lower risk, especially during market downturns when correlated assets may all decline simultaneously.

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 may benefit from optimization using the Efficient Frontier, which focuses on achieving the best risk-return ratio. This involves adjusting the weights of existing assets to maximize returns for a given level of risk. However, the presence of highly correlated assets suggests that diversification improvements are needed first. By reducing overlap and enhancing diversification, the portfolio could move closer to the Efficient Frontier, optimizing its risk-return profile.

Dividends Info

  • iShares Core S&P 500 ETF 1.30%
  • Invesco NASDAQ 100 ETF 0.60%
  • Vanguard Information Technology Index Fund ETF Shares 0.60%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Weighted yield (per year) 1.06%

With a total dividend yield of 1.06%, the portfolio provides modest income, mainly from the iShares Core S&P 500 ETF and the Vanguard Total Stock Market Index Fund ETF Shares, each yielding 1.3%. While dividends offer a steady income stream and can cushion against market volatility, the focus on growth-oriented ETFs means income is not the primary driver. Investors seeking higher income might consider reallocating to include more dividend-focused assets, balancing growth with income potential.

Ongoing product costs Info

  • iShares Core S&P 500 ETF 0.03%
  • Invesco NASDAQ 100 ETF 0.15%
  • Vanguard Information Technology Index Fund ETF Shares 0.10%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Weighted costs total (per year) 0.07%

The portfolio's total expense ratio (TER) is impressively low at 0.07%, thanks to the cost-effective nature of the selected ETFs. This low cost structure supports better long-term performance by minimizing fees that could otherwise erode returns. Keeping costs low is crucial for maximizing net gains, especially in a growth-oriented portfolio. Investors should continue to monitor expense ratios and consider cost-effective alternatives if any changes occur, ensuring cost efficiency remains a priority.

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