Moderately Diversified Growth Portfolio with High Technology Exposure and Potential for Strong Performance

Report created on Jun 23, 2024

Risk profile

  • Secure
    Speculative

The risk profile, derived from past market volatility, reflects the level of risk the portfolio is exposed to. This assessment helps align your investments with your financial goals and comfort with market fluctuations.

Diversification profile

  • Focused
    Diversified

The diversification assessment evaluates the spread of investments across asset classes, regions, and sectors. This ensures a balanced mix, reducing risk and maximizing returns by not concentrating in any single area.

Positions

The portfolio is composed entirely of ETFs, with a significant focus on U.S. equities. The largest holding is the iShares Core S&P 500 ETF at 30%, followed by the Invesco NASDAQ 100 ETF at 20%. Other positions include Avantis Emerging Markets Value ETF, Avantis U.S. Small Cap Value ETF, Schwab U.S. Large-Cap Growth ETF, VanEck Semiconductor ETF, and Vanguard Information Technology Index Fund ETF Shares, each making up 10% of the portfolio. This mix suggests a growth-oriented strategy with a tilt towards technology and large-cap equities, balanced by some exposure to small-cap and emerging markets.

Growth Info

Historically, the portfolio has delivered a strong compound annual growth rate (CAGR) of 14.9%, though it has experienced a maximum drawdown of -29.77%. This indicates that while the portfolio has the potential for high returns, it is also subject to significant volatility. A small number of days account for the majority of returns, highlighting the importance of staying invested to capture these gains. The historic performance suggests a robust growth trajectory, but it also underscores the need for a risk management strategy to mitigate potential downturns.

Projection Info

Using a Monte Carlo simulation with 1,000 iterations, the portfolio's future performance was projected based on historical data. The 50th percentile suggests a potential return of 540.75%, while the 67th percentile indicates an even higher return of 859.9%. The 5th percentile shows a more modest return of 31.53%. These projections highlight the portfolio's potential for substantial growth, although they also emphasize the inherent uncertainty and risk. The high number of simulations with positive returns (970) is encouraging, suggesting a favorable outlook.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily weighted towards equities, with 99.82% in stocks and a negligible amount in cash. This allocation aligns with the growth-oriented strategy, as equities typically offer higher returns over the long term compared to other asset classes. However, the lack of diversification into other asset classes such as bonds or real estate could increase the portfolio's volatility. To balance risk, consider diversifying into additional asset classes, which may provide more stability during market fluctuations and help smooth returns over time.

Sectors Info

  • Technology
    47%
  • Financials
    11%
  • Consumer Discretionary
    10%
  • Telecommunications
    8%
  • Industrials
    7%
  • Health Care
    6%
  • Consumer Staples
    4%
  • Energy
    3%
  • Basic Materials
    3%
  • Utilities
    1%
  • Real Estate
    1%

With 46.65% of the portfolio allocated to technology, there is a significant sector concentration. Other sectors include financial services, consumer cyclicals, and communication services, among others. While the heavy weighting in technology has driven strong past performance, it also increases exposure to sector-specific risks. Diversifying sector exposure could help mitigate these risks and reduce volatility. Consider evaluating whether the high concentration in technology aligns with the desired risk profile and investment goals, and adjust sector allocations accordingly.

Regions Info

  • North America
    87%
  • Asia Emerging
    5%
  • Asia Developed
    5%
  • Europe Developed
    1%
  • Latin America
    1%

Geographically, the portfolio is predominantly focused on North America, which accounts for 87.1% of the holdings. There is some exposure to emerging and developed markets in Asia, Europe, and Latin America. This geographic concentration in North America may limit the ability to capitalize on opportunities in other regions. Increasing exposure to international markets could enhance diversification and provide access to growth potential in different economic environments. A more balanced geographic allocation may help reduce regional risks and capture global growth trends.

Redundant positions Info

  • Vanguard Information Technology Index Fund ETF Shares
    Invesco NASDAQ 100 ETF
    Schwab U.S. Large-Cap Growth ETF
    iShares Core S&P 500 ETF
    VanEck Semiconductor ETF
    High correlation

Several assets in the portfolio are highly correlated, particularly those within the technology sector. This includes the Vanguard Information Technology Index Fund ETF Shares, Invesco NASDAQ 100 ETF, Schwab U.S. Large-Cap Growth ETF, iShares Core S&P 500 ETF, and VanEck Semiconductor ETF. High correlation means these assets tend to move in the same direction, reducing diversification benefits. To improve diversification, consider reducing exposure to overlapping assets and incorporating investments with lower correlations. This strategy can help manage risk and enhance portfolio resilience.

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.

Before optimizing the portfolio, focus on reducing high correlation among assets, particularly in the technology sector. This will enhance diversification and potentially improve risk-adjusted returns. Moving along the efficient frontier can help achieve a more conservative or riskier portfolio, depending on the desired risk-return profile. For a riskier portfolio, consider increasing exposure to high-growth sectors or regions. Conversely, for a more conservative approach, incorporate lower-risk asset classes like bonds. Fine-tuning the portfolio along the efficient frontier can balance risk and return effectively.

Dividends Info

  • Avantis® Emerging Markets Value ETF 3.70%
  • Avantis® U.S. Small Cap Value ETF 1.50%
  • iShares Core S&P 500 ETF 1.20%
  • Invesco NASDAQ 100 ETF 0.60%
  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • VanEck Semiconductor ETF 0.40%
  • Vanguard Information Technology Index Fund ETF Shares 0.60%
  • Weighted yield (per year) 1.14%

The portfolio's dividend yield stands at 1.14%, with the highest yield coming from the Avantis Emerging Markets Value ETF at 3.7%. Other ETFs contribute lower yields, reflecting the growth focus of the portfolio. While dividends can provide a steady income stream and cushion against market volatility, the current yield is relatively modest. Investors seeking higher income may need to explore additional income-generating investments. Balancing growth and income can help achieve both capital appreciation and regular cash flow, aligning with broader financial goals.

Ongoing product costs Info

  • Avantis® Emerging Markets Value ETF 0.36%
  • Avantis® U.S. Small Cap Value ETF 0.25%
  • iShares Core S&P 500 ETF 0.03%
  • Invesco NASDAQ 100 ETF 0.15%
  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • VanEck Semiconductor ETF 0.35%
  • Vanguard Information Technology Index Fund ETF Shares 0.10%
  • Weighted costs total (per year) 0.15%

The total expense ratio (TER) for the portfolio is 0.15%, which is relatively low and indicates cost-efficiency. The iShares Core S&P 500 ETF has the lowest expense ratio at 0.03%, while the Avantis Emerging Markets Value ETF and VanEck Semiconductor ETF have higher costs at 0.36% and 0.35%, respectively. Keeping investment costs low is crucial for maximizing net returns over time. Regularly reviewing and managing expenses can help improve overall portfolio performance. Consider the cost-benefit ratio of each ETF to ensure that higher costs are justified by potential returns.

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