A tech-heavy portfolio with high growth potential but limited diversification

Report created on Dec 21, 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 heavily concentrated in technology stocks, with significant holdings in Taiwan Semiconductor Manufacturing, Alphabet Inc, and Apple Inc. This composition reflects a strong focus on individual tech stocks and related ETFs, accounting for nearly 100% of the portfolio. Compared to a typical growth portfolio, which might include a broader mix of sectors and asset classes, this portfolio is less diversified. To enhance resilience against market volatility, consider diversifying into other sectors or asset classes such as bonds or international equities.

Growth Info

Historically, the portfolio has delivered impressive returns, with a compound annual growth rate (CAGR) of 19.58%. However, it also experienced a significant maximum drawdown of -40.98%, indicating potential vulnerability during market downturns. Compared to benchmarks, this performance suggests high volatility typical of tech-focused investments. While past performance is not a guarantee of future results, maintaining a diversified approach can help mitigate such risks and stabilize returns over time.

Projection Info

Using Monte Carlo simulations, the portfolio's future performance was analyzed, projecting a wide range of potential outcomes based on historical data. The median scenario suggests substantial growth, with a 50th percentile return of 837.4%. However, the 5th percentile shows a much lower return of 43.6%, highlighting the uncertainty inherent in such projections. While these simulations provide insight, they rely on past data and assumptions, which may not fully predict future market conditions. Diversification can help reduce reliance on any single outcome.

Asset classes Info

  • Stocks
    100%

The portfolio is overwhelmingly allocated to stocks, with a negligible cash position. This heavy stock allocation aligns with a growth-oriented strategy but lacks the diversification benefits that other asset classes, like bonds or real estate, could provide. Compared to a balanced portfolio, which typically includes a mix of asset classes, this portfolio may be more susceptible to equity market fluctuations. Incorporating other asset classes could help balance risk and improve overall portfolio stability.

Sectors Info

  • Technology
    64%
  • Telecommunications
    30%
  • Consumer Discretionary
    3%
  • Consumer Staples
    1%
  • Health Care
    1%
  • Industrials
    1%

The sector allocation is predominantly in technology, with over 63% exposure, followed by communication services. This concentration is significantly higher than typical growth benchmarks, which often include a broader sector mix. While tech sectors can drive growth, they are also subject to higher volatility, particularly during periods of regulatory scrutiny or economic shifts. To mitigate sector-specific risks, consider diversifying into underrepresented areas such as healthcare or consumer staples, which can provide stability during market downturns.

Regions Info

  • North America
    70%
  • Asia Emerging
    27%
  • Europe Developed
    1%
  • Asia Developed
    1%

The portfolio's geographic exposure is concentrated in North America and Asia Emerging, with limited exposure to Europe and other regions. This allocation may benefit from the growth potential in these areas but could also be vulnerable to region-specific economic or political risks. Compared to global benchmarks, the portfolio is underexposed to Europe and other developed regions. Increasing geographic diversification can help manage risk and capture growth opportunities across different markets.

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, a concept that seeks the best possible risk-return balance. By adjusting the current asset allocation, it may be possible to achieve higher returns for the same level of risk or reduce risk without sacrificing returns. However, this optimization is based solely on the existing assets and does not account for diversification or other investment goals. Regularly reassessing the portfolio's alignment with personal risk tolerance and objectives is essential.

Dividends Info

  • Apple Inc 0.40%
  • Alphabet Inc Class A 0.30%
  • Invesco NASDAQ 100 ETF 0.50%
  • Invesco PHLX Semiconductor ETF 0.50%
  • Taiwan Semiconductor Manufacturing 0.90%
  • Weighted yield (per year) 0.54%

The portfolio's dividend yield is relatively low at 0.54%, typical for growth-oriented investments focused on capital appreciation rather than income. While dividends can provide a steady income stream, their contribution to total returns is minimal in this portfolio. Investors seeking income may consider adding higher-yielding assets to balance growth with regular income. However, the primary focus remains on growth, which aligns with the portfolio's risk profile and objectives.

Ongoing product costs Info

  • Invesco NASDAQ 100 ETF 0.15%
  • Invesco PHLX Semiconductor ETF 0.19%
  • Weighted costs total (per year) 0.06%

The portfolio's costs are competitive, with the Invesco NASDAQ 100 ETF and Invesco PHLX Semiconductor ETF having low expense ratios of 0.15% and 0.19%, respectively. The overall total expense ratio (TER) of 0.06% is impressively low, supporting better long-term performance by minimizing the drag on returns. Keeping costs low is a crucial aspect of maximizing net returns, and this portfolio is well-aligned with best practices in cost management. Regularly reviewing and optimizing costs can further enhance performance.

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