A tech-heavy growth-focused portfolio with low geographic diversification

Report created on Mar 6, 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 and individual stocks, with Vanguard Total Stock Market Index Fund ETF Shares, Invesco NASDAQ 100 ETF, and Vanguard Information Technology Index Fund ETF Shares collectively comprising over 70%. This concentration indicates a strong focus on growth, particularly within the technology sector. Compared to a benchmark that might include a broader range of asset classes, this portfolio is less diversified. A more balanced allocation could mitigate risk and enhance stability, particularly during market volatility. Consider incorporating additional asset classes such as bonds or real estate to achieve a more balanced risk profile.

Growth Info

The portfolio's historic performance has been impressive, with a compound annual growth rate (CAGR) of 22.94%. This strong growth is indicative of its tech-heavy composition, which has benefited from the sector's recent performance. However, the maximum drawdown of -41.42% highlights the potential volatility and risk inherent in such a concentrated portfolio. While past performance provides insight, it's crucial to remember that it doesn't guarantee future results. Diversifying across sectors and asset classes can help reduce the impact of downturns and improve long-term stability.

Projection Info

The Monte Carlo simulation, which uses historical data to project potential future outcomes, suggests a wide range of possible returns. With a 5th percentile outcome of 79.2% and a 50th percentile of 1,320.9%, the projections highlight the portfolio's potential for significant growth but also underscore its risk. It's important to note that simulations are based on historical data and assumptions, which may not account for future market changes. Diversifying into less volatile assets could help stabilize returns and reduce the portfolio's risk profile.

Asset classes Info

  • Stocks
    100%

This portfolio is 100% allocated to stocks, exposing it to the full volatility of the equity markets. While stocks offer growth potential, the lack of diversification across asset classes, such as bonds or cash, increases risk, especially during market downturns. A more diversified asset allocation could provide a buffer against volatility and help preserve capital. Introducing fixed-income assets or other alternative investments can enhance diversification and potentially improve the portfolio's risk-adjusted returns.

Sectors Info

  • Technology
    61%
  • Consumer Discretionary
    18%
  • Telecommunications
    6%
  • Health Care
    4%
  • Financials
    3%
  • Industrials
    3%
  • Consumer Staples
    3%
  • Energy
    1%
  • Utilities
    1%
  • Basic Materials
    1%
  • Real Estate
    1%

The portfolio is heavily concentrated in the technology sector, which comprises 61% of the total allocation. While this sector has driven growth in recent years, it also introduces higher volatility, especially when interest rates rise or regulatory changes occur. To mitigate sector-specific risks, consider reallocating some investments into underrepresented sectors like healthcare or financial services. This approach can provide a more balanced exposure to different economic cycles and reduce reliance on the tech sector's performance.

Regions Info

  • North America
    99%
  • Europe Developed
    1%

With 99% of the portfolio allocated to North American assets, the geographic exposure is limited, potentially missing out on growth opportunities in other regions. A more globally diversified portfolio can reduce regional risk and capture growth in emerging markets. Consider reallocating some investments to include more international exposure, particularly in developed and emerging markets outside North America. This shift can enhance diversification and provide a hedge against regional economic downturns.

Market capitalization Info

  • Mega-cap
    63%
  • Large-cap
    22%
  • Mid-cap
    10%
  • Small-cap
    3%
  • Micro-cap
    1%

The portfolio's market capitalization distribution is skewed towards mega and big-cap stocks, comprising 85% of the total allocation. While these companies offer stability and established growth, the limited exposure to mid, small, and micro-cap stocks may restrict potential gains from high-growth opportunities. Diversifying across market capitalizations can enhance growth potential and provide a more balanced risk profile. Consider increasing allocations to smaller-cap stocks to capture a broader range of growth opportunities.

Redundant positions Info

  • Invesco NASDAQ 100 ETF
    Vanguard Information Technology Index Fund ETF Shares
    High correlation

The portfolio features highly correlated assets, particularly within the technology ETFs, which may limit diversification benefits. When assets move together, they can amplify volatility during market downturns, reducing the effectiveness of diversification. To enhance diversification, consider replacing some highly correlated ETFs with assets that have lower correlations. This strategy can help stabilize returns and reduce risk by ensuring that not all assets react similarly to market changes.

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 structure may not be optimized on the Efficient Frontier, which represents the best possible risk-return ratio. Highly correlated assets, particularly in the tech sector, limit diversification benefits and increase risk. By adjusting allocations and incorporating less correlated assets, the portfolio can move closer to the Efficient Frontier. This optimization can enhance returns for a given level of risk, providing a more efficient investment strategy.

Dividends Info

  • 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) 0.59%

The portfolio's dividend yield is relatively low at 0.59%, reflecting its growth-oriented focus. While dividends can provide a steady income stream, they are less critical for a growth-focused investor. However, incorporating some dividend-paying stocks could enhance income stability and provide a cushion during market volatility. Balancing growth and income can improve the portfolio's overall risk-return profile and support long-term financial goals.

Ongoing product costs Info

  • 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%, supporting better long-term performance by minimizing costs. Low fees are crucial for maximizing net returns, especially in a growth-focused portfolio. Maintaining this low-cost structure is advantageous, but it's also important to ensure that the portfolio's composition aligns with your investment goals. Regularly reviewing and optimizing the portfolio can help maintain cost efficiency while achieving desired outcomes.

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