A growth-focused US-centric portfolio with strong tech exposure but limited diversification

Report created on Jan 5, 2025

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

The portfolio consists of four ETFs, with the Invesco NASDAQ 100 and Vanguard S&P 500 each holding 30%, Avantis U.S. Small Cap Value at 20%, and Vanguard Total Stock Market Index Fund also at 20%. This structure leans heavily towards large-cap US equities, reflecting a growth-oriented strategy. Compared to a typical balanced portfolio, this one is concentrated, with minimal allocation to bonds or international equities. To enhance diversification, consider incorporating different asset classes such as bonds or international stocks, which can offer stability during market fluctuations.

Growth Info

Historically, the portfolio has delivered an impressive Compound Annual Growth Rate (CAGR) of 16.87%, but with a maximum drawdown of -25.27%. This indicates strong growth potential but also significant risk during downturns. The portfolio's performance is notably above average when compared to traditional benchmarks like the S&P 500. However, it's essential to remember that past performance does not guarantee future results. To mitigate potential drawdowns, consider diversifying into less volatile asset classes or sectors.

Projection Info

The forward projection, based on a Monte Carlo simulation with 1,000 iterations, suggests an annualized return of 19.04%. The simulation uses historical data to estimate potential future outcomes, with 993 out of 1,000 simulations showing positive returns. While the median outcome is promising, it's crucial to understand that these projections are not certainties. They offer a range of possibilities, highlighting the importance of diversification to manage risks and capture potential upside across different market conditions.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily weighted in stocks, with 99.9% in equities and a negligible cash component. This allocation aligns with a growth strategy but lacks diversification across asset classes. A typical diversified portfolio might include bonds, real estate, or alternative investments to reduce volatility. By introducing other asset classes, you can potentially enhance the risk-return profile, providing a buffer against stock market volatility and offering more stable returns over time.

Sectors Info

  • Technology
    33%
  • Consumer Discretionary
    13%
  • Financials
    12%
  • Telecommunications
    10%
  • Industrials
    9%
  • Health Care
    8%
  • Consumer Staples
    5%
  • Energy
    5%
  • Basic Materials
    3%
  • Utilities
    2%
  • Real Estate
    1%

The sector allocation is concentrated, with a significant 32.6% in technology, followed by consumer cyclicals and financial services. This tech-heavy focus can lead to higher volatility, especially during periods of interest rate fluctuations or tech sector corrections. Compared to broader market benchmarks, this portfolio is less diversified across sectors. To mitigate sector-specific risks, consider rebalancing to include underrepresented sectors like utilities or healthcare, which can provide stability and income during economic downturns.

Regions Info

  • North America
    99%
  • Europe Developed
    1%

The portfolio is overwhelmingly concentrated in North America, with 98.65% exposure, leaving little room for international diversification. This geographic concentration can expose the portfolio to regional economic downturns or policy changes. A more globally diversified portfolio might include significant allocations to Europe, Asia, or emerging markets. Expanding geographic exposure can reduce regional risks and tap into growth opportunities in other parts of the world, enhancing overall portfolio resilience.

Redundant positions Info

  • Vanguard Total Stock Market Index Fund ETF Shares
    Vanguard S&P 500 ETF
    High correlation

The portfolio features highly correlated assets, particularly between the Vanguard S&P 500 ETF and the Vanguard Total Stock Market Index Fund. High correlation means these assets move similarly, limiting diversification benefits. During market downturns, such overlap can increase risk without adding value. To improve diversification, consider replacing one of these ETFs with assets that have lower correlation, such as international equities or bonds, which can help smooth returns and reduce portfolio volatility.

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 aims to achieve the best possible risk-return ratio. Currently, overlapping assets limit this potential. By adjusting the allocation among existing assets or incorporating new ones, you can potentially enhance the efficiency of the portfolio. This process involves finding the optimal balance between risk and return, ensuring that each asset contributes positively to the overall portfolio performance.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.60%
  • Invesco NASDAQ 100 ETF 0.60%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Weighted yield (per year) 1.12%

The portfolio's dividend yield stands at 1.12%, with contributions from each ETF. While not the primary focus of a growth-oriented portfolio, dividends can provide a steady income stream, cushioning against market volatility. For investors seeking higher income, consider integrating higher-yielding assets or dividend-focused funds. However, remember that higher yields often come with increased risk, so balance is key to maintaining the growth potential of the portfolio.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Invesco NASDAQ 100 ETF 0.15%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Weighted costs total (per year) 0.11%

The total expense ratio (TER) of the portfolio is 0.11%, which is impressively low and supports better long-term performance. Lower costs mean more of your returns stay in your pocket, compounding over time. This cost efficiency aligns well with best practices in portfolio management. To maintain this advantage, regularly review your holdings to ensure expenses remain competitive, and consider lower-cost alternatives if any fund's fees increase significantly.

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