A growth-focused portfolio with significant technology exposure and limited geographic diversification

Report created on Dec 16, 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 equities, with the Schwab S&P 500 Index Fund making up 69.06% of the total holdings. Additionally, NVIDIA Corporation represents 20.19%, and the First Trust NASDAQ Cybersecurity ETF covers 10.75%. Such a composition indicates a strong bias towards large-cap U.S. equities, particularly in the technology sector. While this can drive growth, it also increases exposure to sector-specific risks. To mitigate these risks, consider diversifying into other asset classes like bonds or international stocks to balance potential volatility and enhance long-term stability.

Growth Info

Historically, this portfolio has delivered a remarkable compound annual growth rate (CAGR) of 26.3%, although it experienced a significant maximum drawdown of -60.86%. This illustrates the high-risk, high-reward nature typical of growth-focused portfolios. While past performance can provide insights, it's crucial to remember that it doesn't guarantee future results. Given the high drawdown, it's advisable to prepare for potential downturns by maintaining a cash reserve or diversifying holdings to cushion against market volatility.

Projection Info

The Monte Carlo simulation, which utilizes historical data to project potential future outcomes, suggests a wide range of possible returns. With 1,000 simulations, the portfolio's 5th percentile outcome is 716.27%, while the 50th percentile is 5,953.23%, and the 67th percentile reaches 10,016.83%. Notably, 999 simulations show positive returns, with an annualized return of 40.5%. While these projections are promising, they rely on historical data and assumptions that may not hold in the future. Consider using these projections as a guide rather than a definitive forecast.

Asset classes Info

  • Stocks
    100%

The portfolio is overwhelmingly invested in stocks, with a staggering 99.74% allocation. This lack of asset class diversification can amplify volatility, especially in turbulent markets. While stocks can offer substantial growth, incorporating other asset classes like bonds or real estate could provide stability and income. By diversifying across asset classes, you can potentially reduce risk and improve the portfolio's risk-adjusted returns, making it more resilient to market fluctuations.

Sectors Info

  • Technology
    53%
  • Financials
    9%
  • Health Care
    8%
  • Consumer Discretionary
    7%
  • Telecommunications
    6%
  • Industrials
    6%
  • Consumer Staples
    4%
  • Energy
    2%
  • Utilities
    2%
  • Real Estate
    2%
  • Basic Materials
    1%

A significant 52.95% of the portfolio is concentrated in the technology sector, with other sectors like financial services and healthcare having much smaller allocations. This heavy sectoral bias can lead to increased volatility, especially if the tech sector faces downturns. Balancing sector exposure by investing in underrepresented areas, such as consumer staples or utilities, can help mitigate sector-specific risks. A more balanced sector allocation can provide a smoother return profile over time.

Regions Info

  • North America
    98%
  • Europe Developed
    1%
  • Asia Emerging
    1%

Geographically, the portfolio is predominantly focused on North America, with 97.84% of assets allocated there. This regional concentration can expose the portfolio to risks specific to the U.S. market, such as economic downturns or policy changes. Diversifying across different regions, such as Europe or Asia, can help spread risk and capture growth opportunities in emerging markets. A broader geographic allocation can enhance the portfolio's resilience against regional economic shifts.

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 identifies the best possible risk-return ratio with the current assets. By adjusting the allocation among existing holdings, you can potentially enhance returns or reduce risk. This doesn't necessarily mean adding new assets but rather reallocating within the portfolio to achieve a more efficient balance. Regularly reassessing the portfolio's allocation can ensure it aligns with your risk tolerance and investment goals, maximizing potential returns.

Dividends Info

  • First Trust NASDAQ Cybersecurity ETF 0.40%
  • Weighted yield (per year) 0.04%

The portfolio's overall dividend yield is relatively low at 0.04%, with the First Trust NASDAQ Cybersecurity ETF contributing a yield of 0.4%. While growth-focused portfolios often prioritize capital appreciation over income, dividends can provide a steady income stream and contribute to total returns. Consider incorporating dividend-paying stocks or funds to enhance income generation, especially if income is a priority. This can also help offset some market volatility by providing regular cash flow.

Ongoing product costs Info

  • First Trust NASDAQ Cybersecurity ETF 0.59%
  • Schwab S&P 500 Index Fund 0.02%
  • Weighted costs total (per year) 0.08%

The portfolio's total expense ratio (TER) is modest at 0.08%, with the Schwab S&P 500 Index Fund being particularly cost-effective at 0.02%. Minimizing costs is crucial, as high fees can erode returns over time. The First Trust NASDAQ Cybersecurity ETF, however, has a higher expense ratio of 0.59%. Regularly review and compare fund fees to ensure you're not overpaying. Opting for lower-cost alternatives can improve long-term returns, making a significant difference over the investment horizon.

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