A growth-focused portfolio with high tech exposure and limited geographic diversification

Report created on Jan 7, 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 evenly split across four ETFs, each holding 25% of the total allocation. The portfolio heavily favors equities, with a 99% stock allocation, and is primarily focused on U.S. markets. This structure aligns with a growth-oriented strategy, aiming for capital appreciation. However, the low diversification score suggests a concentration risk, as the portfolio is not spread across a wide range of asset classes or regions. To improve diversification, investors might consider adding different asset classes like bonds or international equities, which can help mitigate risk and provide more stable returns.

Growth Info

The portfolio has demonstrated strong historical performance with a Compound Annual Growth Rate (CAGR) of 14.97%, which is impressive compared to typical market benchmarks. However, it also experienced a significant maximum drawdown of -32.47%, indicating substantial volatility. This suggests that while the portfolio has the potential for high returns, it also carries considerable risk during market downturns. Investors should be prepared for potential fluctuations and consider strategies to manage risk, such as diversifying into less volatile assets or setting aside a cash reserve.

Projection Info

Forward projections using Monte Carlo simulations suggest a wide range of potential outcomes, with an annualized return of 16.26%. The 5th percentile outcome shows a slight loss, while the median and higher percentiles indicate substantial gains. Monte Carlo simulations use historical data to assess potential future returns but are not guaranteed predictions. Given the high variance in potential outcomes, investors should recognize the inherent uncertainty and consider maintaining a diversified approach to manage risk while pursuing growth.

Asset classes Info

  • Stocks
    99%
  • Cash
    1%

The portfolio is overwhelmingly concentrated in stocks, making up over 99% of the asset allocation. This heavy stock allocation aligns with a growth strategy but limits diversification benefits. In comparison, more balanced portfolios typically include a mix of stocks, bonds, and other asset classes to spread risk. Incorporating bonds or alternative assets could reduce volatility and provide income during market downturns, contributing to a more resilient portfolio over time.

Sectors Info

  • Technology
    41%
  • Health Care
    31%
  • Financials
    7%
  • Consumer Discretionary
    5%
  • Telecommunications
    4%
  • Industrials
    4%
  • Consumer Staples
    3%
  • Energy
    2%
  • Utilities
    1%
  • Real Estate
    1%
  • Basic Materials
    1%

The sectoral allocation is heavily weighted towards technology and healthcare, making up over 70% of the portfolio. This concentration in tech and healthcare could result in higher volatility, especially during sector-specific downturns or regulatory changes. While these sectors have experienced strong growth, diversifying into other sectors like consumer staples or utilities could help stabilize returns and reduce sector-specific risks, providing a more balanced approach to sector exposure.

Regions Info

  • North America
    99%

The portfolio's geographic exposure is predominantly in North America, accounting for over 99% of the allocation. This lack of geographic diversification could expose the portfolio to regional economic downturns or policy changes. In contrast, global diversification can mitigate such risks by spreading investments across various markets. Investors might consider adding international equities or funds to achieve broader geographic exposure and reduce reliance on the U.S. market alone.

Redundant positions Info

  • Vanguard Total Stock Market Index Fund ETF Shares
    Vanguard S&P 500 ETF
    High correlation

The portfolio contains highly correlated assets, particularly between the Vanguard Total Stock Market Index Fund ETF and the Vanguard S&P 500 ETF. High correlation means these assets tend to move in the same direction, limiting diversification benefits. Reducing overlap by selecting funds with lower correlations can enhance diversification and improve risk management. This adjustment can help the portfolio withstand market fluctuations more effectively, providing a smoother investment experience.

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 could benefit from optimization using the Efficient Frontier, which seeks the best possible risk-return ratio by adjusting allocations. Currently, the overlap in highly correlated assets limits diversification. By reallocating funds to less correlated assets, the portfolio could achieve a more efficient balance. This doesn't necessarily mean adding new assets but rather adjusting existing ones to better align with optimal risk-return profiles while maintaining the growth focus.

Dividends Info

  • Vanguard Information Technology Index Fund ETF Shares 0.60%
  • Vanguard Health Care Index Fund ETF Shares 1.10%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.20%
  • Weighted yield (per year) 1.02%

The portfolio's dividend yield is relatively low at 1.02%, reflecting its growth focus rather than income generation. While dividends can provide a steady income stream and contribute to total returns, this portfolio prioritizes capital appreciation. Investors seeking income might consider adding higher-yielding assets or dividend-focused funds, balancing the growth potential with regular income to meet cash flow needs or reinvestment opportunities.

Ongoing product costs Info

  • Vanguard Information Technology Index Fund ETF Shares 0.10%
  • Vanguard Health Care Index Fund ETF Shares 0.10%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Weighted costs total (per year) 0.06%

The portfolio's total expense ratio (TER) is impressively low at 0.06%, reflecting the cost-efficient nature of Vanguard ETFs. Low costs are beneficial for long-term performance, as they minimize the drag on returns. Maintaining a focus on cost efficiency is crucial, as even small differences in fees can compound over time. Investors should continue to prioritize low-cost options to maximize net returns and consider cost implications when making any portfolio adjustments.

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