A growth-focused portfolio with heavy tech exposure and low diversification

Report created on May 21, 2025

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

This portfolio is characterized by its singular focus on equity, with all investments tied to the stock market, predominantly through ETFs that track major indices and a significant position in Berkshire Hathaway Inc. The allocation is heavily skewed towards technology, evidenced by the large stake in the Technology Select Sector SPDR® Fund and the tech-heavy Invesco QQQ Trust. While such a composition aligns with a growth-oriented strategy, it lacks diversity across asset classes and sectors, concentrating risk in specific market segments.

Growth Info

Historically, the portfolio has demonstrated strong performance with a Compound Annual Growth Rate (CAGR) of 16.51%. This robust growth is reflective of the bullish trends in the technology sector and the broader market over the review period. However, the maximum drawdown of -31.10% indicates potential volatility and risk, especially in market downturns. The performance is impressive but should be viewed with caution, as past success does not guarantee future returns.

Projection Info

Monte Carlo simulations, which use historical data to project future outcomes, suggest a wide range of potential performances for this portfolio. With the majority of simulations predicting positive returns and a median increase of 670.9%, the outlook appears favorable. However, these projections are based on past market behavior, which may not accurately predict future trends. Investors should consider this uncertainty in their expectations.

Asset classes Info

  • Stocks
    100%

The portfolio's exclusive investment in stocks, without any allocation to bonds, real estate, or other asset classes, maximizes its growth potential but also increases its vulnerability to market fluctuations. Diversifying across different asset classes can help mitigate risk by spreading exposure and potentially stabilizing returns during volatile periods.

Sectors Info

  • Technology
    43%
  • Financials
    26%
  • Telecommunications
    7%
  • Consumer Discretionary
    7%
  • Health Care
    5%
  • Industrials
    4%
  • Consumer Staples
    4%
  • Energy
    1%
  • Utilities
    1%
  • Basic Materials
    1%
  • Real Estate
    1%

With a 43% allocation to technology, the portfolio is heavily dependent on the performance of a single sector. While the tech sector has historically offered substantial growth opportunities, it's also prone to significant volatility. The limited exposure to other sectors like healthcare, industrials, and consumer goods restricts the portfolio's ability to hedge against tech-specific downturns.

Regions Info

  • North America
    99%
  • Europe Developed
    1%

The geographic distribution is almost entirely focused on North America, with a negligible presence in developed European markets. This concentration enhances exposure to the economic and political dynamics within the US but limits potential benefits from global diversification. Expanding into emerging markets or more developed regions could offer additional growth opportunities and risk mitigation.

Market capitalization Info

  • Mega-cap
    59%
  • Large-cap
    29%
  • Mid-cap
    11%

The focus on mega and large-cap stocks, which constitute 88% of the portfolio, aligns with the portfolio's growth and stability objectives. These companies typically offer more predictable returns and resilience during market downturns compared to their smaller counterparts. However, incorporating medium or even small-cap stocks could introduce higher growth potential, albeit with increased risk.

Redundant positions Info

  • iShares Core S&P 500 ETF
    Vanguard S&P 500 ETF
    High correlation
  • Invesco QQQ Trust
    Technology Select Sector SPDR® Fund
    High correlation

The high correlation between the S&P 500 ETFs and the technology-centric funds suggests redundancy, limiting the diversification benefits. This overlap means that market movements affecting one of these investments are likely to impact others similarly, amplifying the portfolio's sensitivity to specific economic events or sectoral shifts.

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.

Optimizing the portfolio involves addressing the high correlation between assets to improve diversification without sacrificing growth potential. This might entail reducing overlapping investments and introducing assets from different sectors or geographic regions. Such adjustments aim to achieve a more efficient risk-return profile, possibly moving the portfolio closer to the Efficient Frontier, where it can enjoy the best possible return for its level of risk.

Dividends Info

  • iShares Core S&P 500 ETF 1.30%
  • Invesco QQQ Trust 0.60%
  • Vanguard S&P 500 ETF 1.30%
  • Technology Select Sector SPDR® Fund 0.70%
  • Weighted yield (per year) 0.78%

The portfolio's overall dividend yield of 0.78% contributes modestly to its total return. While the focus on growth stocks often means lower dividend payouts, these dividends can provide a steady income stream and compound growth over time, especially in volatile or bear markets. Considering a balanced approach that includes higher dividend-yielding assets could enhance income without significantly compromising growth.

Ongoing product costs Info

  • iShares Core S&P 500 ETF 0.03%
  • Invesco QQQ Trust 0.20%
  • Vanguard S&P 500 ETF 0.03%
  • Technology Select Sector SPDR® Fund 0.09%
  • Weighted costs total (per year) 0.07%

The portfolio benefits from relatively low total expense ratios (TERs), averaging 0.07% across the ETFs. This efficient cost structure ensures that a larger portion of investment returns is retained by the investor, enhancing long-term growth potential. Keeping costs low is crucial for maximizing net returns, particularly in a growth-focused strategy.

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