A growth-focused portfolio with high concentration in the technology sector and North America

Report created on Dec 8, 2024

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 heavily invested in equity ETFs, with a significant concentration in large-cap U.S. stocks. It includes six ETFs, predominantly from Vanguard and iShares, with a minor cash holding. Such a structure indicates a clear preference for growth and capital appreciation. ETFs like the Vanguard Total Stock Market Index Fund and Vanguard S&P 500 ETF dominate the portfolio, reflecting a strong bias towards the U.S. market. This composition can lead to high returns in bull markets but may also expose the investor to substantial volatility. To better align with diverse market conditions, consider incorporating other asset classes such as bonds or international equities.

Growth Info

The portfolio has demonstrated a strong historical performance with a compound annual growth rate (CAGR) of 16.06%. However, it faced a maximum drawdown of -32.39%, highlighting significant volatility. This performance suggests that while the portfolio can deliver substantial returns, it is also susceptible to market downturns. Such a drawdown can be unsettling for investors with low risk tolerance. To mitigate this, consider strategies that reduce volatility, such as diversifying into less correlated assets or including defensive sectors that can cushion against market swings.

Projection Info

Forward projections using Monte Carlo simulations suggest a positive outlook, with a median return of 703.91% over the long term. These simulations use historical data to model potential future outcomes, but they cannot account for unprecedented market events. While the high median return is promising, it is essential to remember that this is just one possible outcome among many. To prepare for various scenarios, consider stress-testing the portfolio against different economic conditions and adjusting allocations to balance potential risks and rewards.

Asset classes Info

  • Stocks
    100%

The portfolio is overwhelmingly concentrated in equities, with a nearly negligible cash position. This allocation reflects a high-risk, high-reward strategy typical for growth-oriented investors. Such a focus on stocks can lead to substantial gains in favorable markets but also leaves the portfolio vulnerable to downturns. Diversification across asset classes, such as including fixed income or alternative investments, can help mitigate risk and provide stability. This approach can lead to a more balanced risk-return profile, making the portfolio more resilient in volatile markets.

Sectors Info

  • Technology
    40%
  • Consumer Discretionary
    12%
  • Telecommunications
    11%
  • Financials
    9%
  • Health Care
    9%
  • Industrials
    6%
  • Consumer Staples
    5%
  • Energy
    2%
  • Real Estate
    2%
  • Utilities
    2%
  • Basic Materials
    2%

The portfolio is heavily weighted towards the technology sector, which comprises over 40% of the total allocation. This concentration indicates a strong belief in the growth potential of tech stocks but also exposes the portfolio to sector-specific risks. While technology has been a significant driver of market returns, it is also prone to rapid changes and volatility. To reduce sector risk, consider reallocating some funds to other industries such as healthcare or consumer staples, which tend to be more stable and less correlated with tech.

Regions Info

  • North America
    99%

With over 99% of assets allocated to North America, the portfolio is highly concentrated geographically. This focus on U.S. markets can lead to significant exposure to domestic economic and political risks. While the U.S. has historically been a strong performer, diversification into other regions like Europe or Asia could provide additional growth opportunities and reduce geographic risk. By expanding international exposure, the portfolio can benefit from global economic trends and potentially enhance returns while lowering overall risk.

Redundant positions Info

  • SPDR® Portfolio S&P 500 ETF
    Vanguard Total Stock Market Index Fund ETF Shares
    Vanguard Growth Index Fund ETF Shares
    Invesco QQQ Trust
    iShares Russell 1000 Growth ETF
    Vanguard S&P 500 ETF
    High correlation

The portfolio's assets are highly correlated, meaning they tend to move in tandem. This lack of diversification can increase portfolio risk, as downturns in one asset may likely affect others similarly. While correlated assets can amplify gains during bull markets, they also exacerbate losses during downturns. To reduce correlation risk, consider adding assets with lower correlation, such as international equities or bonds, which can provide a buffer against market volatility and improve the portfolio's risk-adjusted returns.

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 can be optimized using the Efficient Frontier, which seeks the best possible risk-return ratio. However, the current high correlation among assets suggests limited diversification benefits. Before optimizing, focus on reducing overlap by removing redundant ETFs that do not contribute to diversification. By reallocating funds to less correlated assets, the portfolio can achieve a more efficient risk-return balance. This approach not only maximizes potential returns for a given level of risk but also enhances overall portfolio resilience.

Dividends Info

  • iShares Russell 1000 Growth ETF 0.50%
  • Invesco QQQ Trust 0.60%
  • SPDR® Portfolio S&P 500 ETF 1.20%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.20%
  • Vanguard Growth Index Fund ETF Shares 0.50%
  • Weighted yield (per year) 0.90%

The portfolio's dividend yield is relatively low at 0.9%, reflecting its focus on growth rather than income. While dividends can provide a steady income stream and help cushion against market volatility, this portfolio prioritizes capital appreciation. Investors seeking regular income might find this yield insufficient. To enhance income, consider incorporating dividend-focused ETFs or stocks from sectors like utilities or consumer staples, which typically offer higher yields. Balancing growth and income can provide a more comprehensive return profile.

Ongoing product costs Info

  • iShares Russell 1000 Growth ETF 0.19%
  • Invesco QQQ Trust 0.20%
  • SPDR® Portfolio S&P 500 ETF 0.02%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Vanguard Growth Index Fund ETF Shares 0.04%
  • Weighted costs total (per year) 0.08%

The portfolio's total expense ratio (TER) is low at 0.08%, indicating cost-efficiency. Low costs can significantly enhance long-term returns by reducing the drag on performance. However, focusing solely on low-cost investments may limit diversification opportunities. While maintaining cost efficiency is crucial, it should not come at the expense of a well-balanced portfolio. Consider evaluating the cost-benefit of adding slightly higher-cost investments that offer diversification or unique growth opportunities, ensuring a balanced approach to both costs and returns.

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