A growth-focused portfolio with strong US equity concentration and moderate diversification

Report created on Dec 7, 2024

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 heavily weighted towards US equities, with a significant 64% allocation in the Invesco NASDAQ 100 ETF, and 25% in the Vanguard S&P 500 ETF. These ETFs focus on large-cap US stocks, offering exposure to major companies. The remaining small allocations are in international stocks and dividend-focused US equities. This composition suggests a focus on growth through established US markets. For a more balanced risk-return profile, consider diversifying further into other asset classes or regions.

Growth Info

Historically, the portfolio has shown impressive growth with a compound annual growth rate (CAGR) of 16.12%. However, it has also experienced significant volatility, evidenced by a maximum drawdown of -31.03%. This means that while the portfolio has potential for high returns, it can also suffer large temporary losses. If you are uncomfortable with such volatility, consider reallocating to include more stable assets, which could potentially reduce large drawdowns.

Projection Info

Monte Carlo simulations help project future performance by simulating various market scenarios based on historical data. In this case, the portfolio's simulations show a wide range of potential outcomes, with a median return of 495.81%. However, it's crucial to understand that these projections are not guarantees. They rely on historical data and assumptions that may not hold in the future. Regularly reviewing and adjusting your portfolio can help ensure it aligns with your evolving goals and risk tolerance.

Asset classes Info

  • Stocks
    100%

The portfolio is almost entirely composed of stocks, with a negligible allocation to cash and other asset classes. This heavy stock concentration suggests a high-risk, high-reward strategy, suitable for investors seeking capital appreciation. However, this lack of diversification can expose the portfolio to market volatility. Consider incorporating bonds or other asset classes to balance risk and provide a buffer against stock market downturns.

Sectors Info

  • Technology
    42%
  • Telecommunications
    13%
  • Consumer Discretionary
    13%
  • Health Care
    8%
  • Consumer Staples
    6%
  • Financials
    6%
  • Industrials
    6%
  • Energy
    2%
  • Basic Materials
    2%
  • Utilities
    2%
  • Real Estate
    1%

There is a notable concentration in the technology sector, which constitutes over 42% of the portfolio. While this has driven past growth, it also exposes the portfolio to sector-specific risks. A downturn in the tech industry could significantly impact overall performance. To mitigate this risk, consider diversifying into underrepresented sectors like utilities or real estate, which can provide stability and reduce dependency on tech performance.

Regions Info

  • North America
    92%
  • Europe Developed
    4%
  • Asia Emerging
    1%
  • Japan
    1%
  • Asia Developed
    1%
  • Latin America
    1%

The portfolio's geographic exposure is predominantly in North America, with over 91% of investments focused in this region. This concentration reflects confidence in the US market but limits exposure to potentially lucrative opportunities in other regions. To achieve better geographic diversification, consider increasing allocations to emerging markets or developed regions outside of North America, which could enhance returns and reduce regional risk.

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 current portfolio can be optimized using the Efficient Frontier, which aims to achieve the best possible risk-return ratio. By adjusting the allocations among existing assets, you can potentially enhance returns for a given level of risk. This doesn't necessarily mean adding new assets but rather finding the right balance between them. Regularly reassessing and rebalancing the portfolio can help maintain this optimal balance, especially as market conditions change.

Dividends Info

  • Invesco NASDAQ 100 ETF 0.60%
  • Schwab U.S. Dividend Equity ETF 2.50%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total International Stock Index Fund ETF Shares 2.90%
  • Weighted yield (per year) 0.98%

The portfolio's dividend yield is relatively low at 0.98%, primarily due to the focus on growth-oriented ETFs. The Schwab U.S. Dividend Equity ETF offers a higher yield of 2.5%, but its small allocation limits the overall impact. If income generation is a priority, consider increasing exposure to dividend-focused investments. This can provide a steady income stream and potentially enhance total returns, especially in volatile markets.

Ongoing product costs Info

  • Invesco NASDAQ 100 ETF 0.15%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.11%

The total expense ratio (TER) for this portfolio is 0.11%, which is quite low. This indicates that the portfolio is cost-effective, as lower costs can lead to higher net returns over time. However, always be vigilant about fees, as they can erode gains. Regularly review each ETF's expense ratio and explore lower-cost alternatives if available, ensuring that the cost savings do not compromise the portfolio's strategy or performance.

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