High-risk growth-focused portfolio with significant tech sector concentration and low geographic diversification

Report created on Dec 13, 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 heavily invested in U.S. large-cap growth stocks, with a 50% allocation to the Schwab U.S. Large-Cap Growth ETF and the remaining 50% spread equally among five major tech companies. This composition indicates a strong focus on growth through well-established tech giants. Given its limited diversification, the portfolio is highly dependent on the performance of these few companies and sectors. To mitigate risks, consider introducing more varied asset classes, such as bonds or international equities, which can provide stability and reduce volatility.

Growth Info

Historically, the portfolio has delivered impressive returns, with a compound annual growth rate (CAGR) of 23.36%. However, it experienced a significant maximum drawdown of -40.69%, highlighting its vulnerability to market downturns. This pattern is typical for growth-focused portfolios that thrive in bullish markets but suffer during downturns. To better manage risk, consider incorporating assets with lower volatility or diversifying across different market sectors, which can help cushion against future drawdowns.

Projection Info

The portfolio's forward projection, based on Monte Carlo simulations, suggests a wide range of potential outcomes. With an annualized return of 31.6% across simulations, the median scenario projects substantial growth. However, these projections rely on historical data, which may not account for future market conditions. While optimistic, they are not guarantees. To prepare for various scenarios, consider setting a clear investment strategy that includes regular portfolio reviews and adjustments based on changing market conditions and personal financial goals.

Asset classes Info

  • Stocks
    100%

The portfolio is almost entirely composed of stocks, with a negligible cash component. This lack of diversification across asset classes increases exposure to equity market risks. While stocks can offer high returns, they also come with higher volatility. Introducing other asset classes, like bonds or real estate, can help balance risk and return by providing income and stability. Diversifying across asset classes can also reduce the impact of adverse market movements on the portfolio's overall performance.

Sectors Info

  • Technology
    44%
  • Telecommunications
    26%
  • Consumer Discretionary
    16%
  • Health Care
    5%
  • Financials
    4%
  • Industrials
    2%
  • Consumer Staples
    1%
  • Basic Materials
    1%

The portfolio is heavily concentrated in the technology sector, which makes up 44% of the total allocation. Other sectors like communication services and consumer cyclicals also have notable allocations. This concentration can lead to increased risk if the tech sector underperforms. To achieve better sectoral balance, consider reallocating some investments to underrepresented sectors such as healthcare or industrials, which can provide stability and enhance diversification, reducing the portfolio's overall risk exposure.

Regions Info

  • North America
    100%

Geographically, the portfolio is almost entirely focused on North America, with a negligible allocation to Europe. This concentration exposes the portfolio to risks associated with the U.S. market and limits potential benefits from global diversification. Broadening geographic exposure can help mitigate regional risks and capture growth opportunities in emerging and developed markets outside North America. Consider exploring international funds or stocks that can introduce geographic diversity and reduce reliance on the U.S. market.

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 potentially be optimized using the Efficient Frontier, which seeks to achieve the best possible risk-return ratio. Currently, the portfolio's heavy concentration in tech stocks may not align with the optimal risk-return balance. By reallocating within the existing assets, or considering new ones, the portfolio can be adjusted to improve efficiency. This optimization focuses solely on enhancing the risk-return profile, rather than increasing diversification, and should be aligned with the investor's risk tolerance and goals.

Dividends Info

  • Apple Inc 0.40%
  • Alphabet Inc Class C 0.20%
  • Meta Platforms Inc. 0.20%
  • Microsoft Corporation 0.70%
  • Schwab U.S. Large-Cap Growth ETF 0.30%
  • Weighted yield (per year) 0.30%

The portfolio's dividend yield is relatively low at 0.3%, reflecting its focus on growth stocks that typically reinvest earnings rather than distribute them. While dividends can provide a steady income stream, this portfolio prioritizes capital appreciation. If income generation is a goal, consider adding dividend-paying stocks or funds to enhance yield. Balancing growth and income can provide a more stable return profile, especially during periods of market volatility.

Ongoing product costs Info

  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • Weighted costs total (per year) 0.02%

The portfolio's costs are minimal, with the Schwab U.S. Large-Cap Growth ETF having a low expense ratio of 0.04%. Keeping costs low is beneficial for long-term returns, as high fees can erode gains over time. While the current cost structure is efficient, it's important to regularly review and compare fees of any new investments. Ensuring a cost-effective portfolio can maximize net returns, allowing more of the portfolio's growth to benefit the investor.

What next?

Ready to invest in this portfolio?

Select a broker that fits your needs and watch for low fees to maximize your returns.

Select broker

Create your own report?

Analyze your portfolio

Join our community!

Join Discord

The information provided on this platform is for informational purposes only and should not be considered as financial or investment advice. Insightfolio does not provide investment advice, personalized recommendations, or guidance regarding the purchase, holding, or sale of financial assets. The tools and content are intended for educational purposes only and are not tailored to individual circumstances, financial needs, or objectives.

Insightfolio assumes no liability for the accuracy, completeness, or reliability of the information presented. Users are solely responsible for verifying the information and making independent decisions based on their own research and careful consideration. Use of the platform should not replace consultation with qualified financial professionals.

Investments involve risks. Users should be aware that the value of investments may fluctuate and that past performance is not an indicator of future results. Investment decisions should be based on personal financial goals, risk tolerance, and independent evaluation of relevant information.

Insightfolio does not endorse or guarantee the suitability of any particular financial product, security, or strategy. Any projections, forecasts, or hypothetical scenarios presented on the platform are for illustrative purposes only and are not guarantees of future outcomes.

By accessing the services, information, or content offered by Insightfolio, users acknowledge and agree to these terms of the disclaimer. If you do not agree to these terms, please do not use our platform.

Instrument logos provided by Elbstream.

Help us improve Insightfolio

Your feedback makes a difference! Share your thoughts in our quick survey. Take the survey