A concentrated tech-heavy growth portfolio with strong past performance but limited diversification

Report created on Feb 19, 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 is heavily weighted towards U.S. large-cap growth, with 45% in the Schwab U.S. Large-Cap Growth ETF. This focus on growth stocks aligns with the portfolio's risk classification of "Profile_Growth." The inclusion of other ETFs like the Vanguard Total Stock Market Index Fund and the Schwab U.S. Dividend Equity ETF adds some diversity, but the overall composition leans heavily towards a growth strategy. This concentration may result in higher volatility, especially during market downturns, compared to a more diversified portfolio. To enhance risk management, consider adding more diverse assets.

Growth Info

The portfolio has shown impressive historic performance with a CAGR of 22.92%, indicating strong growth over time. However, it experienced a maximum drawdown of -32.68%, reflecting significant volatility. This pattern suggests that while the portfolio can generate high returns, it is also susceptible to substantial losses during market downturns. Comparing this with a benchmark, such as the S&P 500, can provide context for these figures. Investors should consider if they are comfortable with this level of volatility, and potentially explore strategies to manage risk.

Projection Info

The Monte Carlo simulation, which uses historical data to project future outcomes, shows a wide range of potential results. The median projection indicates a potential portfolio growth of 1,856.4%, with all simulations resulting in positive returns. However, it's important to remember that these projections are not guarantees, as they are based on past performance. The wide range of outcomes highlights the inherent uncertainty in investing. Investors should use these projections as one of many tools in their decision-making process, rather than relying on them exclusively.

Asset classes Info

  • Stocks
    100%

The portfolio is 100% allocated to stocks, offering no exposure to other asset classes like bonds or real estate. While this concentration can drive higher returns during a bull market, it also increases risk and volatility. A more balanced asset allocation would typically include a mix of equities, fixed income, and possibly alternative investments, which can help cushion against market downturns. To enhance diversification, consider incorporating other asset classes that align with your investment goals and risk tolerance.

Sectors Info

  • Technology
    50%
  • Consumer Discretionary
    10%
  • Financials
    10%
  • Telecommunications
    9%
  • Health Care
    9%
  • Industrials
    5%
  • Consumer Staples
    4%
  • Energy
    2%
  • Basic Materials
    1%
  • Utilities
    1%
  • Real Estate
    1%

With 50% of the portfolio in the technology sector, it is heavily tech-focused. While this has been beneficial during periods of tech growth, it also increases vulnerability to sector-specific risks, such as regulatory changes or tech bubbles. The remaining allocation is spread across various sectors, but none exceed 10%. A more balanced sector allocation could reduce risk and improve stability. Consider diversifying into sectors that may perform well in different economic conditions to achieve a more resilient portfolio.

Regions Info

  • North America
    98%
  • Asia Developed
    1%
  • Europe Developed
    1%

The portfolio is predominantly invested in North America, with 98% exposure, leaving only 2% in other developed regions. This heavy U.S. focus may limit the benefits of geographic diversification and expose the portfolio to regional economic risks. Diversifying geographically can help mitigate risks associated with economic downturns in a single region and provide exposure to growth opportunities in emerging markets. Consider increasing international exposure to better align with global benchmarks and enhance diversification.

Market capitalization Info

  • Mega-cap
    51%
  • Large-cap
    31%
  • Mid-cap
    14%
  • Small-cap
    3%
  • Micro-cap
    1%

The portfolio is primarily invested in mega and large-cap stocks, accounting for 82% of the allocation. This focus on larger companies typically offers stability and lower volatility compared to small and mid-cap stocks. However, it may limit exposure to the potential high growth of smaller companies. Including more small and mid-cap stocks can provide diversification benefits and enhance growth potential. Evaluate your risk tolerance and investment goals to determine if a shift in market capitalization allocation is appropriate.

Redundant positions Info

  • Vanguard Total Stock Market Index Fund ETF Shares
    Vanguard Information Technology Index Fund ETF Shares
    Schwab U.S. Large-Cap Growth ETF
    High correlation

The portfolio contains highly correlated assets, particularly among the Vanguard Total Stock Market Index Fund, Vanguard Information Technology Index Fund, and Schwab U.S. Large-Cap Growth ETF. High correlation means these assets tend to move together, limiting diversification benefits. In volatile markets, this can lead to increased risk. To improve diversification, consider reducing exposure to overlapping assets and incorporating investments with lower correlations. This adjustment can help manage risk and improve the portfolio's resilience against market fluctuations.

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 the best possible risk-return ratio. Currently, the high correlation among certain assets limits diversification benefits. By adjusting allocations and potentially incorporating assets with lower correlations, the portfolio can be moved closer to the Efficient Frontier. This optimization does not guarantee higher returns but aims to achieve the best balance between risk and return. Consider exploring asset allocation strategies to enhance this balance.

Dividends Info

  • Schwab U.S. Dividend Equity ETF 3.60%
  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • VanEck Semiconductor ETF 0.40%
  • Invesco S&P 500® Momentum ETF 0.40%
  • Vanguard Information Technology Index Fund ETF Shares 0.60%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.20%
  • Weighted yield (per year) 0.86%

The portfolio's overall dividend yield is 0.86%, with the Schwab U.S. Dividend Equity ETF contributing the most at 3.60%. While dividends provide a steady income stream, this portfolio's yield is relatively low due to its growth focus. Investors seeking income may need to supplement this portfolio with higher-yielding assets. However, for those prioritizing growth, the current yield is consistent with the portfolio's objectives. Consider your income needs and investment goals when evaluating the role of dividends in your strategy.

Ongoing product costs Info

  • Schwab U.S. Dividend Equity ETF 0.06%
  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • VanEck Semiconductor ETF 0.35%
  • Invesco S&P 500® Momentum ETF 0.13%
  • Vanguard Information Technology Index Fund ETF Shares 0.10%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Weighted costs total (per year) 0.09%

The portfolio's total expense ratio (TER) is 0.09%, which is impressively low and supports better long-term performance by minimizing costs. Lower fees mean more of your returns are retained, which compounds over time. This cost efficiency aligns well with best practices in portfolio management. While the costs are already optimized, regularly reviewing expense ratios ensures they remain competitive. Maintaining low costs is crucial for maximizing returns, especially in a growth-focused portfolio with high potential returns.

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