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

Report created on Jul 3, 2024

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

The portfolio is entirely composed of ETFs, each holding a 20% share, focusing heavily on U.S. equities. This uniform allocation indicates a strong growth orientation. However, it lacks diversification across asset classes, which can increase vulnerability to market volatility. Compared to a more balanced benchmark, this portfolio leans heavily toward equity, particularly growth stocks. To mitigate risk, consider diversifying into other asset classes like bonds or international equities, which can provide stability during market downturns.

Growth Info

Historically, this portfolio has shown robust performance, achieving a Compound Annual Growth Rate (CAGR) of 15.65%. This impressive growth outpaces many benchmarks, reflecting the strong performance of U.S. equities over the past decade. However, the maximum drawdown of -28.33% highlights its susceptibility to market downturns. Past performance does not guarantee future results, so it's essential to regularly assess whether the portfolio's risk level aligns with your investment goals.

Projection Info

Using Monte Carlo simulations, which predict potential outcomes based on historical data, the portfolio shows promising forward projections. The median outcome suggests a 616.8% growth, while even the conservative 5th percentile indicates a positive return. However, remember that simulations rely on past data and assumptions, which may not account for future market changes. Continuously monitoring and adjusting the portfolio can help navigate unexpected market shifts and maintain alignment with financial objectives.

Asset classes Info

  • Stocks
    100%

The portfolio is concentrated solely in stocks, missing out on the diversification benefits that bonds or other asset classes might offer. This 100% equity allocation aligns with a high-risk, high-reward strategy typical of growth-focused portfolios. Compared to diversified benchmarks, the absence of bonds or alternative investments could lead to increased volatility. To enhance stability, consider adding non-equity asset classes, which can cushion against market fluctuations and provide more consistent returns over time.

Sectors Info

  • Technology
    39%
  • Consumer Discretionary
    13%
  • Telecommunications
    11%
  • Health Care
    9%
  • Financials
    9%
  • Industrials
    6%
  • Consumer Staples
    6%
  • Energy
    4%
  • Basic Materials
    1%
  • Utilities
    1%
  • Real Estate
    1%

Sector-wise, the portfolio is heavily skewed towards technology, which constitutes 39% of the holdings. Such concentration may lead to higher volatility, especially during periods of interest rate hikes or tech sector downturns. Compared to a more balanced sector allocation, this portfolio may experience significant swings. To mitigate sector-specific risks, consider redistributing some investments into underrepresented sectors like healthcare or consumer staples, which may offer more stability during economic cycles.

Regions Info

  • North America
    99%
  • Europe Developed
    1%

Geographically, the portfolio is almost entirely focused on North America, with 99% exposure. This lack of international diversification can increase vulnerability to U.S. market-specific risks. Compared to global benchmarks, the absence of exposure to emerging markets or developed regions outside North America limits potential growth opportunities. To enhance geographic diversification, consider reallocating a portion of the portfolio to include international equities, which can provide a hedge against domestic market volatility.

Market capitalization Info

  • Mega-cap
    47%
  • Large-cap
    36%
  • Mid-cap
    16%
  • Small-cap
    1%

The portfolio's market capitalization distribution is weighted heavily towards mega and large-cap stocks, comprising 83% of the holdings. This concentration provides stability and growth potential but may limit exposure to the higher growth potential of small and mid-cap companies. Compared to more diversified benchmarks, this allocation could miss out on the dynamic growth of smaller firms. To capture a broader range of opportunities, consider increasing exposure to small and mid-cap stocks, which can add growth potential and diversification benefits.

Redundant positions Info

  • Vanguard Growth Index Fund ETF Shares
    Invesco NASDAQ 100 ETF
    Schwab U.S. Large-Cap Growth ETF
    High correlation

The portfolio contains highly correlated assets, particularly within the growth-oriented ETFs like the Vanguard Growth Index Fund and Invesco NASDAQ 100 ETF. High correlation means these assets tend to move together, reducing the diversification benefits. In market downturns, this could lead to amplified losses. To improve diversification, consider reducing overlap by selecting ETFs with different investment focuses or adding assets with lower correlation, which can help stabilize 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.

While the portfolio's current assets could be optimized on the Efficient Frontier for a better risk-return balance, the high correlation among holdings limits diversification benefits. The Efficient Frontier represents the best possible risk-return ratio, but achieving it requires a mix of assets that complement each other. Consider replacing or adjusting the allocation of highly correlated ETFs to enhance diversification and better align with the Efficient Frontier, potentially improving risk-adjusted returns.

Dividends Info

  • Invesco NASDAQ 100 ETF 0.60%
  • Schwab U.S. Dividend Equity ETF 3.60%
  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Growth Index Fund ETF Shares 0.50%
  • Weighted yield (per year) 1.26%

With a total dividend yield of 1.26%, the portfolio offers moderate income, primarily driven by the Schwab U.S. Dividend Equity ETF. While dividends can provide a steady income stream, this yield is relatively low for income-focused portfolios. For growth-oriented investors, dividends may be less of a priority. However, if income becomes a goal, consider increasing exposure to high-dividend ETFs or stocks, which can enhance the portfolio's income generation without compromising growth potential.

Ongoing product costs Info

  • Invesco NASDAQ 100 ETF 0.15%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Growth Index Fund ETF Shares 0.04%
  • Weighted costs total (per year) 0.06%

The portfolio boasts a low total expense ratio (TER) of 0.06%, which is commendable and aligns with cost-efficient investing principles. Low costs contribute positively to long-term returns by minimizing the drag on investment performance. This efficient cost structure is a strong point, supporting better net returns over time. To maintain this advantage, regularly review fund expenses and consider cost-effective alternatives if any holdings experience fee increases, ensuring continued alignment with financial goals.

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