Moderately Diversified Growth Portfolio with High Risk and Strong Technology Focus

Report created on Nov 25, 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 composed of a mix of ETFs and individual stocks, predominantly within the U.S. market. With a 30% allocation to the Vanguard S&P 500 ETF and a 20% allocation to the Invesco NASDAQ 100 ETF, the portfolio leans heavily on large-cap U.S. equities. The inclusion of the Avantis U.S. Small Cap Value ETF adds a small-cap dimension, while the Vanguard Total International Stock Index Fund offers some international exposure. Individual stocks like AbbVie, NVIDIA, Palantir, and Rocket Lab provide a concentrated focus on specific companies. Overall, this portfolio aims for growth but could benefit from further diversification.

Growth Info

Historically, the portfolio has demonstrated impressive performance with a compound annual growth rate (CAGR) of 22.95%. However, this growth comes with significant volatility, as evidenced by a maximum drawdown of -32.47%. This suggests that while the portfolio has the potential for high returns, it is also susceptible to substantial losses during market downturns. The concentration of returns in just 26 days highlights the reliance on a few key periods for performance, indicating a need for diversification to smooth out returns over time.

Projection Info

Using a Monte Carlo simulation with 1,000 iterations, the portfolio's future performance was projected. The simulation assumes a hypothetical initial investment and provides a range of possible outcomes. The 5th percentile outcome is a 68.24% return, while the median (50th percentile) projects a 2,233.78% return, and the 67th percentile estimates a 4,843.47% return. With 978 simulations yielding positive returns, the portfolio has a high potential for future gains, but the variability suggests the need for a balanced approach to manage risks effectively.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily weighted towards stocks, with 99.76% allocated to equities. This high concentration in a single asset class indicates a strong growth orientation but also increases exposure to market volatility. A small fraction is held in cash and other asset classes, which provides minimal diversification. To reduce risk, consider allocating a portion of the portfolio to bonds or other fixed-income securities, which can offer stability and income during market fluctuations.

Sectors Info

  • Technology
    35%
  • Industrials
    13%
  • Health Care
    12%
  • Financials
    10%
  • Consumer Discretionary
    9%
  • Telecommunications
    7%
  • Consumer Staples
    4%
  • Energy
    4%
  • Basic Materials
    3%
  • Utilities
    1%
  • Real Estate
    1%

The sector allocation reveals a significant concentration in technology, accounting for 35.03% of the portfolio. Other sectors like industrials, healthcare, and financial services have notable allocations, but the heavy tech focus may expose the portfolio to sector-specific risks. While technology has been a strong performer, diversifying across more sectors could mitigate potential downturns in this area. Balancing the sector exposure can help achieve a more resilient portfolio that can better withstand market shifts.

Regions Info

  • North America
    88%
  • Europe Developed
    5%
  • Asia Emerging
    2%
  • Japan
    2%
  • Asia Developed
    1%
  • Australasia
    1%
  • Latin America
    1%

Geographically, the portfolio is predominantly focused on North America, which makes up 87.54% of the allocation. This regional concentration could limit exposure to global growth opportunities and increase vulnerability to U.S. market-specific risks. While there is some allocation to developed Europe, Asia, and other regions, it remains minimal. Increasing international exposure can provide access to diverse economic cycles and reduce reliance on the U.S. market, enhancing the portfolio's overall stability and growth potential.

Redundant positions Info

  • Invesco NASDAQ 100 ETF
    Vanguard S&P 500 ETF
    High correlation

The portfolio contains highly correlated assets, particularly between the Invesco NASDAQ 100 ETF and the Vanguard S&P 500 ETF. This correlation suggests that these assets tend to move in the same direction, reducing the diversification benefits. To enhance diversification, consider replacing or reducing exposure to overlapping assets. Introducing uncorrelated assets can help smooth out returns and lower the overall risk, ensuring that the portfolio is not overly reliant on a single market trend or sector.

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 overlapping assets that do not offer diversification benefits. By removing highly correlated assets, the portfolio can achieve a more balanced risk-reward profile. For those seeking a riskier portfolio, increasing exposure to growth stocks or sectors may be beneficial. Conversely, a more conservative approach could involve allocating more to bonds or dividend-paying stocks. Moving along the efficient frontier can help tailor the portfolio to better match individual risk preferences and financial goals.

Dividends Info

  • AbbVie Inc 3.50%
  • Avantis® U.S. Small Cap Value ETF 1.50%
  • Invesco NASDAQ 100 ETF 0.60%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total International Stock Index Fund ETF Shares 3.00%
  • Weighted yield (per year) 1.26%

The portfolio's dividend yield stands at 1.26%, largely driven by AbbVie Inc's 3.5% yield and the Vanguard Total International Stock Index Fund's 3.0% yield. While the yield is modest, it provides some income potential alongside capital appreciation. To enhance income, consider increasing exposure to dividend-paying stocks or ETFs, which can offer a steady income stream and potential tax advantages. Balancing growth and income-oriented investments can create a more well-rounded portfolio that meets both short and long-term financial goals.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Invesco NASDAQ 100 ETF 0.15%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.08%

The portfolio's total expense ratio (TER) is 0.08%, which is relatively low, indicating cost efficiency in the investment choices. The Vanguard S&P 500 ETF has the lowest cost at 0.03%, while the Avantis U.S. Small Cap Value ETF is the highest at 0.25%. Keeping investment costs low is crucial for maximizing net returns over time. Regularly reviewing and comparing the expense ratios of the portfolio's components can ensure that costs remain competitive, allowing for more of the portfolio's returns to be retained.

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