A tech-heavy portfolio with significant growth potential but limited diversification

Report created on Dec 7, 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 concentrated in technology stocks, with 80% of the allocation split equally among Apple, Alphabet, Microsoft, and NVIDIA. The remaining 20% is invested in the Vanguard S&P 500 ETF, which provides some diversification across the broader market. Having such a high concentration in a single sector can lead to increased volatility and risk. While the technology sector has been a strong performer, it's important to consider the benefits of spreading investments across different sectors to reduce risk and enhance stability.

Growth Info

Historically, this portfolio has demonstrated impressive growth, with a compound annual growth rate (CAGR) of 32.14%. However, it has also experienced significant volatility, as evidenced by a maximum drawdown of -56.3%. This means that while the portfolio has the potential for high returns, it also carries substantial risk, which can lead to large losses in market downturns. Investors should be aware that past performance does not guarantee future results and should consider their risk tolerance when evaluating this portfolio.

Projection Info

The Monte Carlo simulation, which uses historical data to predict future outcomes, suggests a promising outlook for this portfolio. With 1,000 simulations, the median (50th percentile) shows a potential return of 5,002.56%, while even the 5th percentile projects a positive return of 593.04%. However, it's important to note that simulations are based on historical data and assumptions, which may not fully capture future market conditions. Investors should use these projections as a guide but remain cautious about over-relying on them for decision-making.

Asset classes Info

  • Stocks
    100%

This portfolio is heavily weighted towards stocks, comprising 99.98% of its allocation, with a negligible amount in cash. Such a high allocation to equities can lead to higher returns over the long term, but it also increases exposure to market volatility. Diversifying across different asset classes, such as bonds or real estate, can help mitigate risk and provide a more balanced approach. Investors should consider their risk tolerance and investment goals when deciding on their asset allocation strategy.

Sectors Info

  • Technology
    67%
  • Telecommunications
    22%
  • Financials
    3%
  • Health Care
    2%
  • Consumer Discretionary
    2%
  • Industrials
    2%
  • Consumer Staples
    1%
  • Energy
    1%
  • Utilities
    1%

The portfolio is predominantly invested in the technology sector, accounting for 66.6% of its allocation. Other sectors, such as communication services and financial services, have minimal representation. While technology has been a strong performer, overexposure to a single sector can increase risk, particularly if that sector experiences a downturn. To enhance diversification and reduce risk, investors may consider reallocating a portion of their investments to other sectors, such as healthcare or consumer goods, which can provide stability and balance.

Regions Info

  • North America
    100%

Geographically, this portfolio is almost entirely focused on North America, with 99.88% of the allocation in this region. Such a concentration can expose the portfolio to regional economic and political risks. By diversifying into other geographic areas, such as Europe or Asia, investors can reduce their reliance on the performance of a single region and potentially benefit from growth opportunities in different markets. A more globally diversified portfolio can help mitigate risks associated with regional downturns.

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.

This portfolio can potentially be optimized using the Efficient Frontier, which seeks to maximize returns for a given level of risk. By adjusting the allocation among existing assets, investors can achieve a better risk-return ratio. However, this optimization does not necessarily imply enhanced diversification or alignment with specific investment goals. Investors should consider their risk tolerance and objectives when making allocation adjustments, ensuring that the portfolio remains aligned with their overall strategy.

Dividends Info

  • Apple Inc 0.40%
  • Alphabet Inc Class A 0.20%
  • Microsoft Corporation 0.50%
  • Vanguard S&P 500 ETF 1.20%
  • Weighted yield (per year) 0.46%

The portfolio's dividend yield is relatively low at 0.46%, with individual stocks like Apple and Microsoft contributing small yields. While dividends can provide a steady income stream, this portfolio is more focused on capital appreciation through growth stocks. Investors seeking regular income may want to consider adding higher-yielding assets to balance growth with income generation. However, prioritizing growth stocks can be beneficial for those with a long-term investment horizon who can tolerate short-term volatility.

Ongoing product costs Info

  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.01%

The portfolio's costs are minimal, with the Vanguard S&P 500 ETF having a low expense ratio of 0.03%. Keeping costs low is crucial for maximizing long-term returns, as high fees can erode gains over time. Investors should regularly review their portfolio expenses and consider cost-effective options, such as low-cost index funds or ETFs, to ensure they are not overpaying for investment management. Maintaining a low-cost structure can significantly enhance the overall performance of the portfolio.

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