A tech-heavy speculative portfolio with high risk and low diversification

Report created on Jan 23, 2025

Risk profile Info

7/7
Speculative
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

The portfolio is heavily concentrated in tech stocks, with Apple, NVIDIA, and Broadcom making up over 50% of the allocation. While this focus on tech can drive high growth, it also increases risk due to sector concentration. Compared to a typical diversified portfolio, this one lacks balance across different asset classes and sectors. To enhance stability, consider diversifying into sectors like healthcare or consumer staples, which can provide a buffer during tech downturns.

Growth Info

Historically, this portfolio has shown impressive growth with a CAGR of 58.01%, but it also experienced significant volatility, evidenced by a max drawdown of -53.86%. This indicates that while the portfolio can achieve high returns, it is also susceptible to large losses. Benchmarking against a more diversified index could highlight the need for risk management. To mitigate such risks, consider incorporating assets with lower volatility and more stable returns.

Projection Info

The Monte Carlo simulation, which uses historical data to predict future outcomes, suggests a bleak outlook with all simulations resulting in a 100% loss. This highlights the limitations of relying solely on past performance and the importance of diversification. To improve future projections, consider balancing high-risk assets with more stable investments. This approach can enhance the probability of positive returns while managing risk effectively.

Asset classes Info

  • Stocks
    100%

The portfolio is entirely invested in common stocks, lacking exposure to other asset classes like bonds or real estate. This singular focus increases risk, especially during market downturns. Diversifying across asset classes can reduce volatility and provide a more stable return profile. Introducing bonds or real estate could offer a hedge against stock market fluctuations and improve overall portfolio resilience.

Sectors Info

  • Technology
    63%
  • Telecommunications
    23%
  • Health Care
    4%
  • Financials
    2%
  • Consumer Discretionary
    2%
  • Industrials
    2%
  • Real Estate
    1%
  • Consumer Staples
    1%
  • Energy
    1%

With 63% of the portfolio in technology, there's a significant sector concentration risk. While this has driven growth, it also exposes the portfolio to tech sector volatility, especially during regulatory changes or interest rate hikes. Diversifying into sectors like healthcare or consumer staples could provide stability and reduce reliance on tech performance. A balanced sector allocation aligns more closely with benchmark diversification standards.

Regions Info

  • North America
    98%
  • Asia Emerging
    2%

The portfolio's geographic allocation is predominantly North American at 98%, limiting exposure to international markets. This lack of geographic diversification can increase vulnerability to regional economic downturns. Expanding into emerging markets or Europe could enhance diversification and tap into growth opportunities outside North America. A more balanced geographic spread aligns with global investment trends and reduces regional risk.

Market capitalization Info

  • Mega-cap
    80%
  • Large-cap
    8%
  • Small-cap
    7%
  • Mid-cap
    4%

The portfolio is heavily weighted towards mega-cap stocks at 80%, with minimal exposure to small and medium caps. While mega-caps offer stability, they may limit growth potential compared to smaller companies. Balancing market capitalization by increasing small and medium-cap exposure can enhance growth prospects and diversification. This approach can also reduce dependency on a few large companies, spreading risk across a broader range of investments.

Redundant positions Info

  • VANGUARD S&P MID-CAP 400 INDEX FUND INSTITUTIONAL SHARES
    VANGUARD SMALL-CAP INDEX FUND INSTITUTIONAL SHARES
    High correlation

The portfolio contains highly correlated assets, particularly among the Vanguard funds, which limits diversification benefits. When assets move in tandem, the portfolio is more susceptible to market swings. Reducing correlation by selecting assets with varied performance drivers can enhance diversification and risk management. Consider incorporating assets with low or negative correlation to existing holdings to improve overall portfolio stability.

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 can be optimized using the Efficient Frontier, which suggests a potential return of 62.11% with a lower risk level of 39.11%. This optimization focuses on reallocating existing assets to achieve the best risk-return ratio. By reducing overlapping, highly correlated assets and balancing the allocation, the portfolio can achieve higher returns with managed risk. This approach enhances efficiency without sacrificing growth potential.

Dividends Info

  • Apple Inc 0.40%
  • Broadcom Inc 0.90%
  • Alphabet Inc Class A 0.30%
  • Micron Technology Inc 0.40%
  • Taiwan Semiconductor Manufacturing 1.00%
  • VANGUARD INSTITUTIONAL INDEX FUND INSTITUTIONAL PLUS SHARES 0.90%
  • VANGUARD SMALL-CAP INDEX FUND INSTITUTIONAL SHARES 1.30%
  • VANGUARD S&P MID-CAP 400 INDEX FUND INSTITUTIONAL SHARES 0.90%
  • Weighted yield (per year) 0.41%

Dividend yield is relatively low at 0.41%, reflecting the portfolio's growth focus. While dividends can provide a steady income stream, this portfolio prioritizes capital appreciation over income. For investors seeking income, consider adding higher-yielding stocks or dividend-focused funds. This can complement growth stocks and offer a balanced approach, providing both income and potential for capital gains.

Ongoing product costs Info

  • T. ROWE PRICE HEALTH SCIENCES FUND INC. T. ROWE PRICE HEALTH SCIENCES FUND-I CLASS 0.67%
  • T. ROWE PRICE SCIENCE & TECHNOLOGY FUND INC. T. ROWE PRICE SCIENCE & TECHNOLOGY FUND-I CLASS 0.69%
  • VANGUARD INSTITUTIONAL INDEX FUND INSTITUTIONAL PLUS SHARES 0.02%
  • VANGUARD SMALL-CAP INDEX FUND INSTITUTIONAL SHARES 0.04%
  • VANGUARD S&P MID-CAP 400 INDEX FUND INSTITUTIONAL SHARES 0.08%
  • Weighted costs total (per year) 0.05%

The portfolio's costs are well-managed, with a total expense ratio (TER) of 0.05%, thanks to low-cost Vanguard funds. Keeping costs low is crucial for long-term performance, as high fees can erode returns. This cost efficiency aligns with best practices, ensuring more of your investment returns stay in your pocket. Continue monitoring fund expenses to maintain this advantage and consider lower-cost alternatives if fees rise.

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