A tech-heavy growth portfolio with strong past performance but high correlation risks

Report created on Dec 23, 2024

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

The portfolio is heavily weighted towards ETFs, with a significant emphasis on technology and semiconductor sectors. With 89.9% in stocks and 10% in other assets, it aligns with a growth-focused strategy. Comparatively, a typical growth portfolio might have a more balanced allocation between sectors and asset classes. This composition suggests a high potential for returns, but also increased volatility. Consider diversifying into other asset classes or sectors to reduce risk and improve balance.

Growth Info

Historically, the portfolio has demonstrated impressive performance with a Compound Annual Growth Rate (CAGR) of 19.4%. This indicates strong growth potential, significantly outperforming many benchmarks. However, the maximum drawdown of -35.36% highlights vulnerability during market downturns. While past performance is not a guarantee of future results, maintaining awareness of such volatility can help manage expectations and inform risk management strategies.

Projection Info

The Monte Carlo simulation, which uses historical data to forecast potential future outcomes, indicates a wide range of possible returns. With a median projection of 838.86% growth, the portfolio shows promising potential. However, the 5th percentile projection of 103.7% suggests there is still a risk of minimal growth. Remember, simulations rely on past data and assumptions, meaning actual future performance can differ. Regularly revisiting projections can help keep expectations aligned with changing market conditions.

Asset classes Info

  • Stocks
    90%
  • Other
    10%

The portfolio's heavy allocation to stocks (89.9%) and minimal exposure to other asset classes limits diversification. While stocks typically offer higher returns, they also carry higher risk. A more balanced allocation, including bonds or real estate, could provide stability and reduce overall portfolio risk. Comparing this allocation to a typical balanced portfolio, which might include 60% stocks and 40% bonds or other assets, highlights the potential for greater diversification.

Sectors Info

  • Technology
    60%
  • Consumer Discretionary
    7%
  • Telecommunications
    7%
  • Health Care
    4%
  • Financials
    4%
  • Consumer Staples
    3%
  • Industrials
    2%
  • Energy
    1%
  • Utilities
    1%
  • Basic Materials
    1%
  • Real Estate
    1%

With 60.38% in technology, the portfolio is highly concentrated in a single sector, increasing potential volatility. Such concentration can lead to significant impacts from sector-specific events, such as regulatory changes or technological disruptions. In comparison, a more diversified sector allocation could include greater exposure to consumer staples or utilities, which tend to be less volatile. Consider gradually reallocating to achieve a more balanced sector distribution.

Regions Info

  • North America
    83%
  • Asia Developed
    4%
  • Europe Developed
    3%

The portfolio's geographic exposure is predominantly North American (83.25%), with limited diversification across other regions. This concentration may expose the portfolio to regional economic risks, such as policy changes or economic downturns. A more globally diversified allocation could mitigate these risks and potentially enhance returns. Consider exploring opportunities in developed European or emerging markets to achieve a more balanced global exposure.

Redundant positions Info

  • iShares Russell Top 200 Growth ETF
    Invesco NASDAQ 100 ETF
    High correlation
  • iShares Semiconductor ETF
    VanEck Semiconductor ETF
    High correlation

The portfolio includes highly correlated assets, particularly among the technology-focused ETFs. This correlation implies that these assets often move in tandem, limiting diversification benefits. During market downturns, such correlation can exacerbate losses. Reducing overlap by replacing some correlated ETFs with assets from different sectors or asset classes could improve diversification and risk management.

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 be optimized using the Efficient Frontier, which seeks the best possible risk-return ratio. Currently, the portfolio's expected return is outperformed by the optimal portfolio's expected return of 15.82% at a similar risk level. This suggests room for improvement by reallocating assets to achieve better efficiency. However, optimization should be balanced with personal investment goals and risk tolerance, ensuring alignment with broader financial strategies.

Dividends Info

  • iShares Russell Top 200 Growth ETF 0.30%
  • Invesco NASDAQ 100 ETF 0.50%
  • iShares Semiconductor ETF 0.50%
  • Vanguard S&P 500 ETF 0.90%
  • Weighted yield (per year) 0.40%

The portfolio's dividend yield is relatively low at 0.4%, reflecting its growth-oriented focus. While dividends can provide a steady income stream and cushion against market volatility, this portfolio prioritizes capital appreciation. Investors seeking income might consider adding higher-yielding assets, though this could alter the growth focus. Balancing growth and income can help achieve long-term financial goals while managing risk.

Ongoing product costs Info

  • SPDR® Gold Shares 0.40%
  • iShares Russell Top 200 Growth ETF 0.20%
  • Invesco NASDAQ 100 ETF 0.15%
  • VanEck Semiconductor ETF 0.35%
  • iShares Semiconductor ETF 0.35%
  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.23%

The portfolio's Total Expense Ratio (TER) of 0.23% is impressively low, supporting better long-term performance by minimizing costs. Lower expenses mean more of your investment returns stay in your pocket, compounding over time. This cost efficiency aligns well with best practices, ensuring that the portfolio's growth potential is not significantly eroded by fees. Regularly reviewing and maintaining low-cost investments can enhance overall returns.

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