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

Report created on Jan 9, 2025

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

4/5
Broadly Diversified
Less diversification More diversification

Positions

The portfolio is heavily weighted towards equities, with a significant 40% allocation to the Vanguard Total World Stock Index Fund ETF and 27.54% to the SPDR S&P 500 ETF Trust. This composition aligns with a growth strategy, emphasizing capital appreciation over income generation. Compared to common benchmarks, this portfolio shows a high concentration in U.S. stocks, reflecting a domestic bias. To enhance diversification, consider adding other asset classes such as bonds or real estate investment trusts, which can provide a buffer against stock market volatility and potentially improve risk-adjusted returns.

Growth Info

Historically, the portfolio has delivered a strong Compound Annual Growth Rate (CAGR) of 25.02%, indicating robust performance. However, it also experienced a significant maximum drawdown of -58.27%, highlighting its vulnerability during market downturns. This volatility is typical for growth-focused portfolios. Comparing this performance to benchmarks like the S&P 500, which has a lower drawdown, suggests that while the portfolio is capable of high returns, it also entails higher risk. Investors should be prepared for potential fluctuations and consider strategies to mitigate downside risk, such as diversification or hedging.

Projection Info

Monte Carlo simulations project a wide range of potential outcomes, with a 50th percentile return of 5,011.07%. This method uses historical data to simulate future performance, offering insights into possible portfolio trajectories. However, it's important to note that past performance does not guarantee future results. The simulations suggest a high probability of positive returns, with 999 out of 1,000 simulations showing gains. While promising, investors should remain cautious of relying solely on historical data and consider current market conditions when making decisions.

Asset classes Info

  • Stocks
    100%

The portfolio is overwhelmingly concentrated in stocks, accounting for 99.56% of the total allocation. This focus on equities aligns with a growth strategy but limits diversification benefits. Compared to a typical balanced portfolio, which might include a mix of stocks and bonds, this allocation is aggressive. To enhance diversification and potentially reduce volatility, consider incorporating other asset classes such as fixed income or commodities. This can help cushion the portfolio against market fluctuations and provide a more stable return profile over time.

Sectors Info

  • Technology
    47%
  • Consumer Discretionary
    12%
  • Financials
    10%
  • Health Care
    7%
  • Industrials
    6%
  • Telecommunications
    6%
  • Consumer Staples
    4%
  • Energy
    2%
  • Basic Materials
    2%
  • Utilities
    2%
  • Real Estate
    2%

The portfolio exhibits a strong concentration in the technology sector, comprising 46.75% of the total allocation. This heavy tech focus aligns with growth objectives but may increase vulnerability to sector-specific risks, such as regulatory changes or market shifts. Compared to common benchmarks, this concentration is significantly higher, suggesting a potential for increased volatility. Investors might consider rebalancing to achieve a more even sector distribution, which could involve increasing exposure to underrepresented sectors like healthcare or consumer staples to enhance stability and diversification.

Regions Info

  • North America
    86%
  • Europe Developed
    6%
  • Asia Emerging
    2%
  • Japan
    2%
  • Asia Developed
    2%
  • Australasia
    1%
  • Africa/Middle East
    1%

Geographically, the portfolio is heavily skewed towards North America, with 86.13% exposure. This concentration limits diversification benefits and increases susceptibility to regional economic fluctuations. Compared to global benchmarks, this allocation shows a significant underexposure to emerging markets and other regions. To improve geographic diversification, consider increasing allocations to international markets, which can provide exposure to different economic cycles and growth opportunities. This approach can help mitigate risks associated with regional downturns and enhance the portfolio's resilience.

Redundant positions Info

  • SPDR S&P 500 ETF Trust
    Vanguard Total World Stock Index Fund ETF Shares
    High correlation

The portfolio's assets, particularly the SPDR S&P 500 ETF Trust and the Vanguard Total World Stock Index Fund ETF, are highly correlated. This high correlation means that these assets tend to move in the same direction, reducing the overall diversification benefits. During market downturns, this lack of diversification can lead to more significant portfolio losses. To enhance diversification, consider replacing or complementing these assets with others that have lower correlation, which can help smooth out returns and reduce risk.

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 to achieve the best possible risk-return ratio. This involves adjusting the asset allocation to maximize returns for a given level of risk. However, it's crucial to note that this optimization is based solely on the current assets and their allocation. While this approach can enhance efficiency, it may not address other goals such as diversification or income generation. Consider using optimization tools to explore different allocation scenarios and identify potential improvements.

Dividends Info

  • Microsoft Corporation 0.70%
  • SPDR S&P 500 ETF Trust 0.90%
  • Vanguard Total World Stock Index Fund ETF Shares 1.90%
  • Weighted yield (per year) 1.08%

The portfolio's overall dividend yield is 1.08%, with contributions from Microsoft Corporation, SPDR S&P 500 ETF Trust, and Vanguard Total World Stock Index Fund ETF Shares. This yield is relatively modest, reflecting the portfolio's growth orientation, which prioritizes capital appreciation over income. For investors seeking higher income, consider increasing exposure to dividend-paying stocks or funds. However, it's essential to balance this with the portfolio's growth objectives, as high-dividend stocks may offer lower capital gains potential.

Ongoing product costs Info

  • SPDR S&P 500 ETF Trust 0.10%
  • Vanguard Total World Stock Index Fund ETF Shares 0.07%
  • Weighted costs total (per year) 0.06%

The portfolio's Total Expense Ratio (TER) is impressively low at 0.06%, with individual costs for SPDR S&P 500 ETF Trust and Vanguard Total World Stock Index Fund ETF Shares at 0.1% and 0.07%, respectively. These low costs are advantageous for long-term performance, as they minimize the drag on returns. Compared to industry averages, this cost structure is highly competitive. Maintaining low costs should remain a priority, as even small fee reductions can significantly impact long-term compounding. Regularly reviewing and optimizing expenses can further enhance returns.

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