A growth-focused portfolio with high risk and low geographic diversification

Report created on Dec 28, 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 equally split between two ETFs: Invesco S&P 500® Momentum ETF and Vanguard Total Stock Market Index Fund ETF Shares. This composition leans heavily towards equities, with minimal cash allocation. Compared to typical diversified portfolios, this one is highly concentrated in U.S. equities, which can amplify both potential returns and risks. A more diversified portfolio might include a mix of bonds, international stocks, and alternative assets to balance risk and reward.

Growth Info

Historically, the portfolio has achieved an impressive Compound Annual Growth Rate (CAGR) of 19.42%, albeit with a significant maximum drawdown of -32.94%. This indicates strong growth potential but also highlights the portfolio's vulnerability during market downturns. While past performance is not indicative of future results, these metrics suggest that the portfolio has performed well in favorable market conditions but may suffer in volatile periods.

Projection Info

Monte Carlo simulations project a wide range of potential outcomes, with a median return of 1,111.74% over the investment horizon. This method uses historical data to simulate future performance, providing a probabilistic view of potential returns. However, it's important to note that these projections are not guarantees, as they rely on historical patterns that may not repeat. The positive outcome in all simulations is encouraging, but investors should remain cautious of market unpredictability.

Asset classes Info

  • Stocks
    100%

The portfolio is overwhelmingly concentrated in stocks, with 99.88% in equities and a negligible cash position. Such allocation can drive significant growth but also exposes the portfolio to high volatility. Diversifying into other asset classes, such as bonds or real estate, could provide stability and reduce overall risk. Comparing to benchmark portfolios, this allocation lacks the balance typically seen in diversified strategies.

Sectors Info

  • Technology
    27%
  • Financials
    18%
  • Consumer Discretionary
    12%
  • Health Care
    11%
  • Industrials
    9%
  • Telecommunications
    9%
  • Consumer Staples
    6%
  • Energy
    3%
  • Utilities
    2%
  • Real Estate
    2%
  • Basic Materials
    1%

Sector allocation is heavily skewed towards Technology (27.46%) and Financial Services (17.85%), with other sectors like Real Estate and Basic Materials underrepresented. This concentration can lead to higher volatility, especially if these sectors face downturns. Balancing sector weights could help mitigate risks associated with sector-specific downturns. Aligning closer to benchmark sector distributions might enhance diversification.

Regions Info

  • North America
    99%
  • Europe Developed
    1%

Geographically, the portfolio is almost entirely invested in North America (99.07%), with minimal exposure to other regions. This lack of geographic diversification could increase vulnerability to regional economic downturns. Expanding exposure to international markets can provide diversification benefits and reduce reliance on the U.S. economy. Comparing to global benchmarks, this portfolio is significantly under-diversified geographically.

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 the best possible risk-return ratio based on current assets. By adjusting allocations within the existing assets, the portfolio might achieve a more favorable balance between risk and reward. This optimization focuses on maximizing returns for a given level of risk, but it does not inherently improve diversification or other investment goals.

Dividends Info

  • Invesco S&P 500® Momentum ETF 0.30%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.20%
  • Weighted yield (per year) 0.75%

With a total dividend yield of 0.75%, the portfolio provides modest income alongside capital growth. While dividends can enhance returns, this portfolio's yield is relatively low, reflecting its growth-oriented focus. Investors seeking higher income might consider increasing exposure to dividend-paying stocks or funds. However, for those prioritizing growth, the current yield aligns with the portfolio's objectives.

Ongoing product costs Info

  • Invesco S&P 500® Momentum ETF 0.13%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Weighted costs total (per year) 0.08%

The portfolio's Total Expense Ratio (TER) is 0.08%, which is impressively low and supports better long-term performance by minimizing costs. This cost efficiency is a strong advantage, allowing more of the portfolio's returns to be retained. Keeping expenses low is crucial, as high fees can erode investment gains over time. This portfolio's cost structure aligns well with best practices in cost management.

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