High-Risk Growth Portfolio with Low Diversification and Heavy Tech Sector Exposure

Risk profile

  • Secure
    Speculative

The risk profile, derived from past market volatility, reflects the level of risk the portfolio is exposed to. This assessment helps align your investments with your financial goals and comfort with market fluctuations.

Diversification profile

  • Focused
    Diversified

The diversification assessment evaluates the spread of investments across asset classes, regions, and sectors. This ensures a balanced mix, reducing risk and maximizing returns by not concentrating in any single area.

What type of investor this portfolio is suitable for

Growth Investors

This portfolio is suitable for growth-oriented investors comfortable with high risk and volatility. These investors typically have a long investment horizon, allowing them to ride out market fluctuations. They aim for substantial capital appreciation rather than income generation, focusing on equities for potential high returns. Such investors should have a strong risk tolerance, as the portfolio's concentrated nature can lead to significant drawdowns. A willingness to embrace market changes and adapt to evolving economic conditions is essential for managing this type of portfolio.

Positions

  • Vanguard S&P 500 ETF
    VOO - US9229083632
    65.00%
  • Vanguard Information Technology Index Fund ETF Shares
    VGT - US92204A7028
    25.00%
  • Vanguard High Dividend Yield Index Fund ETF Shares
    VYM - US9219464065
    10.00%

The portfolio is heavily weighted in Vanguard ETFs, with a significant 65% allocation to the S&P 500 ETF. The Information Technology Index Fund ETF takes up 25%, while the High Dividend Yield Index Fund ETF rounds out the portfolio with 10%. This composition indicates a focus on growth through equity investments, primarily within the U.S. market. The low diversification score suggests a concentrated approach, which could be beneficial in strong bull markets but may expose the portfolio to higher risk during downturns. Consider broadening the allocation to include different asset classes for better balance.

Growth Info

Historically, the portfolio has performed well, with a compound annual growth rate (CAGR) of 15.58%. This impressive return is accompanied by a maximum drawdown of -33.32%, which highlights the volatility and risk associated with the current allocation. The portfolio's returns are concentrated, with just 36 days accounting for 90% of the profits. This indicates a reliance on market timing, which can be unpredictable. To mitigate this risk, consider a more balanced approach that could provide steadier returns over time, potentially reducing the impact of market fluctuations.

Projection Info

Using a Monte Carlo simulation, which models potential future performance based on historical data, the portfolio shows promising projections. Assuming a hypothetical initial investment, the simulation suggests a median growth of 659.72% and a high likelihood of positive returns in 996 out of 1,000 simulations. However, the high volatility and concentrated asset allocation could lead to significant swings in value. To enhance stability, consider diversifying across more sectors and asset classes, which may help smooth out potential future volatility and provide more consistent growth.

Asset classes Info

  • Stocks
    100%
  • Cash
    0%

The portfolio's asset class allocation is heavily skewed towards stocks, with 99.82% in equities and a negligible 0.18% in cash. This concentration in a single asset class suggests a high-risk profile, aiming for aggressive growth. While equities can offer substantial returns, they also come with increased volatility. To mitigate risk, consider incorporating other asset classes like bonds or real estate, which could provide diversification benefits and potentially reduce overall portfolio volatility, offering a more balanced risk-return profile.

Sectors Info

  • Technology
    48%
  • Financials
    11%
  • Health Care
    8%
  • Consumer Discretionary
    7%
  • Telecommunications
    6%
  • Industrials
    6%
  • Consumer Staples
    5%
  • Energy
    3%
  • Utilities
    2%
  • Basic Materials
    1%
  • Real Estate
    1%

Sector allocation reveals a significant concentration in technology, which comprises 47.53% of the portfolio. Other sectors like financial services, healthcare, and consumer cyclicals are present but hold smaller weights. This tech-heavy allocation can drive impressive growth during periods of technological advancement but also exposes the portfolio to sector-specific risks. To enhance resilience, consider diversifying into underrepresented sectors. This approach may help cushion the portfolio against downturns in the tech sector and provide a more balanced exposure to various economic cycles.

Regions Info

  • North America
    99%
  • Europe Developed
    1%
  • Asia Developed
    0%
  • Latin America
    0%
  • Africa/Middle East
    0%
  • Asia Emerging
    0%

Geographically, the portfolio is predominantly focused on North America, with 99.21% of assets allocated there. This regional concentration limits exposure to global markets, potentially missing out on opportunities in emerging and developed markets outside the U.S. While a strong North American focus can benefit from local market growth, it also increases vulnerability to regional economic downturns. To reduce geographic risk and capitalize on global growth opportunities, consider diversifying into international markets, which could provide additional growth potential and reduce reliance on a single economic region.

Redundant positions Info

  • Vanguard Information Technology Index Fund ETF Shares
    Vanguard S&P 500 ETF
    Vanguard High Dividend Yield Index Fund ETF Shares
    High correlation

The portfolio exhibits high correlation among its assets, with all three ETFs moving in similar directions historically. This lack of diversification among holdings increases systemic risk, as downturns could affect all assets simultaneously. Correlated assets limit the portfolio's ability to hedge against market volatility, potentially leading to larger drawdowns. To improve risk management, consider incorporating assets with lower correlations, which could help offset losses during market downturns and provide a smoother ride through various market conditions.

Dividends Info

  • Vanguard Information Technology Index Fund ETF Shares 0.60%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard High Dividend Yield Index Fund ETF Shares 2.70%
  • Weighted yield (per year) 1.20%

The portfolio's dividend yield stands at 1.2%, with the Vanguard High Dividend Yield Index Fund ETF contributing the highest yield at 2.7%. While dividends provide a steady income stream, the overall yield is relatively modest, given the portfolio's growth focus. Enhancing yield could improve income generation, especially during market downturns when capital gains may be harder to achieve. Consider balancing growth and income by including higher-yielding investments, which could provide a cushion during volatile periods and enhance total returns over time.

Ongoing product costs Info

  • Vanguard Information Technology Index Fund ETF Shares 0.10%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard High Dividend Yield Index Fund ETF Shares 0.06%
  • Weighted costs total (per year) 0.05%

The portfolio benefits from low costs, with a total expense ratio (TER) of just 0.05%. This efficient cost structure helps maximize net returns, as lower fees mean more of the portfolio's gains are retained. Keeping investment costs low is essential for long-term growth, as fees can significantly erode returns over time. Continue to prioritize low-cost investment options to maintain this advantage. While costs are currently well-managed, always be vigilant about any potential fee increases or changes in the cost structure that could impact overall performance.

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.

The portfolio currently sits in a high-risk, high-reward zone, with a focus on growth through equities. The efficient frontier suggests an optimal balance between risk and return, but the current allocation leans towards higher risk due to its concentrated nature. To move closer to the efficient frontier, consider diversifying across asset classes and sectors, which can reduce risk without sacrificing potential returns. This approach could help achieve a more optimal portfolio, balancing growth aspirations with risk management for better overall performance.

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