A growth-focused portfolio heavily weighted in technology with low geographic diversification
Report created on Dec 12, 2024Risk profile
5/7
Diversification profile
2/5
Positions
-
QQ Invesco QQQ Trust
QQQ - US46090E1038 50.41% -
VT Vanguard Total Stock Market Index Fund ETF Shares
VTI - US9229087690 49.59%
The portfolio is primarily composed of two ETFs: Invesco QQQ Trust and Vanguard Total Stock Market Index Fund ETF Shares. The Invesco QQQ Trust holds the majority at over 50%, indicating a significant focus on technology and large-cap growth stocks. The Vanguard ETF provides broad market exposure but is almost equal in weight, suggesting a concentration in U.S. equities. This composition reflects a growth-oriented strategy, aiming for capital appreciation. However, such concentration can expose the portfolio to sector-specific risks. Consider diversifying across more asset classes or funds to mitigate potential volatility and enhance risk-adjusted returns.
Growth
Historically, the portfolio has performed well with a Compound Annual Growth Rate (CAGR) of 16.96%. This indicates strong growth, likely driven by the tech-heavy allocation in Invesco QQQ Trust. However, it also experienced a maximum drawdown of -31.29%, highlighting the risk associated with high growth strategies. While past performance can offer insights, it's crucial to remember that it doesn't guarantee future results. Investors should weigh the impressive past returns against the potential for significant losses during market downturns, and consider their risk tolerance accordingly.
Projection
Using Monte Carlo simulations, the portfolio's future performance was analyzed with 1,000 iterations. This method uses historical data to project a range of potential outcomes, providing a probabilistic view of future returns. The median projection suggests a robust return of 774.72%, but there is a wide range of possible outcomes, with the 5th percentile at 162.96% and the 67th percentile at 1,140.04%. While the simulations show a high likelihood of positive returns, they also underscore the uncertainty inherent in investing. Diversifying into other asset classes could help manage this risk.
Asset classes
- Stocks 100%
The portfolio is heavily skewed towards equities, with stocks comprising nearly 100% of the allocation. While this can drive significant growth, it also increases exposure to market volatility. The minimal cash allocation offers negligible risk mitigation. A more balanced approach, incorporating fixed income or alternative investments, could provide stability and reduce the portfolio's overall risk. By diversifying across asset classes, investors can create a more resilient portfolio that better withstands market fluctuations.
Sectors
- Technology 41%
- Telecommunications 12%
- Consumer Discretionary 12%
- Health Care 9%
- Financials 7%
- Industrials 6%
- Consumer Staples 6%
- Energy 2%
- Utilities 2%
- Basic Materials 2%
- Real Estate 2%
Sector allocation is heavily concentrated, with technology taking up over 40% of the portfolio. Other sectors like communication services and consumer cyclicals also have notable allocations, but there is limited exposure to defensive sectors such as utilities and real estate. This concentration can lead to heightened sensitivity to sector-specific downturns. To enhance diversification, consider reallocating some funds to underrepresented sectors. This can help balance the portfolio and reduce dependency on the performance of a single sector.
Regions
- North America 99%
- Europe Developed 1%
The portfolio is predominantly invested in North American assets, making up over 98% of the geographic allocation. This lack of international exposure limits diversification benefits and increases vulnerability to regional economic downturns. While U.S. markets have historically performed well, incorporating more global assets could provide a hedge against domestic market risks. Expanding into emerging markets or developed regions like Europe and Asia might offer additional growth opportunities and enhance the portfolio's resilience.
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 involves adjusting allocations to achieve the best possible risk-return ratio. This doesn't necessarily mean adding new assets but reallocating existing ones to enhance efficiency. By analyzing the risk and return profiles of the current holdings, investors can identify the optimal mix that maximizes returns for a given level of risk. This process helps in making informed decisions about whether to maintain, increase, or decrease exposure to certain assets based on their contribution to portfolio efficiency.
Dividends
- Invesco QQQ Trust 0.60%
- Vanguard Total Stock Market Index Fund ETF Shares 1.20%
- Weighted yield (per year) 0.90%
The portfolio has a modest dividend yield of 0.9%, with contributions of 0.6% from Invesco QQQ Trust and 1.2% from Vanguard Total Stock Market Index Fund ETF Shares. While dividends provide a steady income stream, the focus on growth stocks means dividends are not a primary driver of returns. If income generation is a goal, consider increasing exposure to dividend-focused funds or stocks. This can provide a more consistent return component, especially valuable during periods of market volatility or downturns.
Ongoing product costs
- Invesco QQQ Trust 0.20%
- Vanguard Total Stock Market Index Fund ETF Shares 0.03%
- Weighted costs total (per year) 0.12%
The portfolio's total expense ratio (TER) is relatively low at 0.12%, with Invesco QQQ Trust at 0.2% and Vanguard ETF at 0.03%. Low costs are advantageous as they enhance net returns over time. However, even small cost reductions can significantly impact long-term performance due to compounding. Regularly review and compare fees with similar investment options to ensure cost efficiency. Consider switching to lower-cost alternatives if available, as reducing expenses is a straightforward way to improve net returns.
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