Highly concentrated portfolio with a strong focus on US equities and technology sector

Report created on Jan 8, 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 heavily concentrated with 97% allocated to the SPDR S&P 500 ETF Trust, 2% to Avantis U.S. Small Cap Value ETF, and 1% to Fidelity MSCI Information Technology Index ETF. Such a concentration in a single ETF results in limited diversification across different asset types. Typically, a balanced portfolio might include a mix of equities, bonds, and other asset classes to mitigate risk. While this composition may benefit from the strong performance of US large-cap stocks, it lacks the diversification that could protect against market volatility.

Growth Info

Historically, the portfolio has shown a robust CAGR of 16.76%, indicating strong growth over time. However, it has also experienced a maximum drawdown of -33.92%, reflecting significant volatility. Compared to typical benchmarks, this performance suggests high returns but also higher risk. It's crucial to remember that past performance doesn't guarantee future results, and such volatility might not suit all investors. Consider diversifying to reduce potential drawdowns while maintaining growth potential.

Projection Info

The Monte Carlo simulation, which uses historical data to project potential future outcomes, indicates an annualized return of 22.23% with the majority of simulations yielding positive returns. However, this method's reliance on past data means it can't predict future market conditions with certainty. While the projections are optimistic, adding more diversified assets could improve the risk-return profile, making the portfolio more resilient to market changes.

Asset classes Info

  • Stocks
    100%

The portfolio is almost entirely composed of stocks, with 99.75% in equities and a negligible 0.25% in cash. This high equity allocation can lead to significant growth potential, aligning with a growth-focused strategy. However, it also introduces high volatility, especially in downturns. A more balanced allocation might include bonds or other asset classes to provide stability and reduce risk, aligning better with diversified benchmark standards.

Sectors Info

  • Technology
    34%
  • Financials
    13%
  • Consumer Discretionary
    12%
  • Health Care
    10%
  • Telecommunications
    9%
  • Industrials
    7%
  • Consumer Staples
    5%
  • Energy
    3%
  • Utilities
    2%
  • Real Estate
    2%
  • Basic Materials
    2%

The portfolio's sector allocation is heavily skewed towards technology, which makes up 33.74% of the portfolio. While this sector has been a strong performer recently, it can also be vulnerable to interest rate changes and regulatory shifts. Other sectors like financial services and consumer cyclicals are also represented, but to a lesser extent. Consider broadening sector exposure to mitigate risks associated with sector-specific downturns and enhance diversification.

Regions Info

  • North America
    99%
  • Europe Developed
    1%

Geographically, the portfolio is overwhelmingly focused on North America, with 99.41% exposure. This concentration limits exposure to international markets, which could provide diversification benefits and potential growth opportunities. Compared to global benchmarks, this lack of geographic diversification could increase risk if the US market underperforms. Expanding exposure to international equities might balance the portfolio and reduce reliance on a single market.

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 allocation could potentially be optimized using the Efficient Frontier, a concept that helps find the best possible risk-return ratio. This optimization involves adjusting the weights between existing assets to achieve a more efficient portfolio. However, it's important to note that this doesn't necessarily mean adding new assets, but rather reallocating the current ones to maximize returns for the level of risk you're willing to accept.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.60%
  • Fidelity® MSCI Information Technology Index ETF 0.40%
  • SPDR S&P 500 ETF Trust 0.90%
  • Weighted yield (per year) 0.91%

The portfolio's dividend yield is 0.91%, which is relatively low and reflects its growth-oriented nature. While dividends can provide a steady income stream, this portfolio focuses more on capital appreciation. Investors seeking regular income might consider increasing exposure to dividend-paying stocks or funds. However, for those prioritizing growth, the current yield aligns with the strategy of reinvesting profits for long-term gains.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Fidelity® MSCI Information Technology Index ETF 0.08%
  • SPDR S&P 500 ETF Trust 0.10%
  • Weighted costs total (per year) 0.10%

With a Total Expense Ratio (TER) of 0.1%, the portfolio's costs are impressively low, supporting better long-term performance by minimizing drag on returns. Low costs are beneficial as they compound over time, enhancing net returns. However, it's important to regularly review these costs and ensure they remain competitive, especially if considering adding or replacing funds to improve diversification or performance.

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