A growth-oriented portfolio with high USA exposure and low sector diversification

Report created on Jan 7, 2025

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 weighted towards two ETFs: Vanguard Total Stock Market (70%) and Invesco NASDAQ 100 (30%). Such a composition leans towards a concentrated asset allocation, as it mainly covers U.S. equities. In comparison to a balanced benchmark, which may include bonds and international equities, this portfolio lacks diversification. A diversified portfolio typically includes a mix of asset classes to spread risk. To enhance diversification, consider including bonds or international equities to balance out the concentration in U.S. stocks.

Growth Info

The historical performance of this portfolio shows a strong CAGR of 15.37%, indicating robust growth. However, the max drawdown of -28.19% highlights potential volatility. While the returns have been impressive, it's important to remember that past performance doesn't guarantee future results. This volatility could impact investors during market downturns. To mitigate this, consider diversifying into less volatile assets or sectors to stabilize returns during turbulent periods.

Projection Info

The Monte Carlo simulation, which uses historical data to predict future outcomes, suggests a wide range of potential returns. The 50th percentile projects a 619.02% return, while the 5th percentile shows a more modest 106.9%. This indicates a high level of uncertainty, common in growth-oriented portfolios. While simulations provide valuable insights, they are not foolproof. Consider using these projections as a guide, not a guarantee, and ensure your investment strategy aligns with your risk tolerance.

Asset classes Info

  • Stocks
    100%

With 99.84% of the portfolio in stocks and a mere 0.16% in cash, this portfolio is highly concentrated in equities. Such a focus may lead to significant growth but also increases exposure to market volatility. In contrast, a diversified portfolio might include bonds or other asset classes to buffer against stock market swings. To enhance stability, consider incorporating a small percentage of bonds or alternative assets, which can provide balance and reduce overall risk.

Sectors Info

  • Technology
    37%
  • Consumer Discretionary
    12%
  • Telecommunications
    11%
  • Health Care
    10%
  • Financials
    10%
  • Industrials
    7%
  • Consumer Staples
    5%
  • Energy
    3%
  • Utilities
    2%
  • Real Estate
    2%
  • Basic Materials
    2%

The portfolio is heavily skewed towards the technology sector, representing 36.80% of the allocation. While tech has been a strong performer, this concentration can lead to increased volatility, especially during market corrections. Other sectors like consumer cyclicals and communication services also have notable allocations. Diversifying across more sectors can reduce risk and improve stability. Consider reallocating some funds to underrepresented sectors to achieve a more balanced sectoral exposure.

Regions Info

  • North America
    99%
  • Europe Developed
    1%

Geographically, the portfolio is overwhelmingly concentrated in North America, with 98.98% of assets. This lack of international exposure limits diversification and increases vulnerability to regional economic downturns. Including more assets from Europe, Asia, or other regions could enhance diversification and mitigate regional risks. A balanced geographic allocation can provide exposure to different economic cycles, potentially stabilizing returns and reducing 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 potentially benefit from optimization through the Efficient Frontier, which seeks the best risk-return ratio. Given its current asset allocation, there might be room to adjust weights for improved efficiency. This doesn't necessarily mean adding more assets but reallocating existing ones for better balance. Such optimization can enhance returns without significantly increasing risk. Regularly reassess your portfolio to ensure it remains aligned with your risk tolerance and investment goals.

Dividends Info

  • Invesco NASDAQ 100 ETF 0.60%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.20%
  • Weighted yield (per year) 1.02%

The portfolio's dividend yield stands at 1.02%, providing a modest income stream. While dividends can enhance total returns, this yield is relatively low for income-focused investors. For those seeking higher income, consider adding dividend-focused funds or equities with higher yields. However, balance is key; ensure that any new additions align with your overall growth goals and risk tolerance, as higher yields can sometimes come with increased risk.

Ongoing product costs Info

  • Invesco NASDAQ 100 ETF 0.15%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Weighted costs total (per year) 0.07%

The portfolio's total expense ratio (TER) is impressively low at 0.07%, supporting better long-term performance by minimizing costs. Low expenses are crucial for maximizing net returns over time. Maintaining this cost efficiency is beneficial, but always be on the lookout for opportunities to reduce fees further. Regularly review your holdings to ensure they remain cost-effective and aligned with your investment strategy, as fees can erode returns significantly over time.

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