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High-growth US-focused portfolio with significant tech exposure and limited diversification benefits

Report created on Jan 21, 2025

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification
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Positions

The portfolio is heavily weighted towards large-cap U.S. growth ETFs, with a strong emphasis on the Vanguard S&P 500 ETF and the Vanguard Total Stock Market Index Fund ETF Shares. This composition suggests a focus on capturing broad market gains, particularly in the U.S. However, the lack of international exposure and the concentration in a few ETFs limit diversification. To enhance diversification, consider introducing non-U.S. equities or alternative asset classes. This could help mitigate risks associated with market-specific downturns and increase potential for balanced growth.

Growth Info

Historically, the portfolio has delivered a robust CAGR of 15.72%, indicating strong growth over time. This performance is impressive compared to typical market benchmarks. However, the maximum drawdown of -32.37% highlights significant volatility, which is common in growth-focused portfolios. It's essential to consider this volatility in the context of your risk tolerance. While past performance is promising, remember it doesn't guarantee future results. Diversifying across asset classes or regions could help manage potential drawdowns.

Projection Info

The Monte Carlo simulation, which uses historical data to project potential future outcomes, suggests a median growth of 700.9% over the investment horizon. With 999 out of 1,000 simulations showing positive returns, the outlook appears favorable. However, remember that simulations rely on historical data, which may not predict future market conditions. Consider diversifying the portfolio to reduce reliance on historical trends and improve resilience against unforeseen market changes.

Asset classes Info

  • Stocks
    100%

The portfolio is entirely composed of stocks, lacking exposure to other asset classes like bonds or real estate. While this aligns with a high-growth strategy, it also increases risk due to the lack of diversification. Incorporating different asset classes can provide stability during market turbulence and help achieve a more balanced risk-return profile. Consider adding fixed income or alternative investments to cushion against equity market volatility.

Sectors Info

  • Technology
    40%
  • Consumer Discretionary
    13%
  • Telecommunications
    12%
  • Financials
    10%
  • Health Care
    8%
  • Industrials
    6%
  • Consumer Staples
    4%
  • Energy
    2%
  • Utilities
    2%
  • Real Estate
    2%
  • Basic Materials
    1%

The portfolio's sector allocation is heavily skewed towards technology, which makes up 40% of the holdings. This concentration can lead to higher volatility, particularly during periods of tech sector instability. While tech has driven recent market gains, diversifying across sectors like healthcare or consumer goods could reduce risk and improve stability. Aligning sector weights closer to broader market benchmarks can enhance diversification and balance.

Regions Info

  • North America
    99%

With 99% of the portfolio's assets in North America, there's minimal geographic diversification. This concentration exposes the portfolio to regional risks, such as economic downturns or policy changes in the U.S. Expanding to include international markets, especially emerging economies, could provide growth opportunities and reduce regional risk. Consider adding global or international ETFs to balance the geographic exposure.

Market capitalization Info

  • Mega-cap
    54%
  • Large-cap
    30%
  • Mid-cap
    14%
  • Small-cap
    2%

The portfolio is predominantly invested in mega and large-cap stocks, which make up 84% of the holdings. While these companies offer stability and lower risk, the lack of exposure to small or mid-cap stocks limits potential for higher growth. Small and mid-cap stocks can provide diversification benefits and higher returns over time. Consider adjusting the allocation to include these segments for a more balanced market cap exposure.

Redundant positions Info

  • Vanguard S&P 500 ETF
    Vanguard Growth Index Fund ETF Shares
    Vanguard S&P 500 Growth Index Fund ETF Shares
    Vanguard Total Stock Market Index Fund ETF Shares
    Schwab U.S. Large-Cap Growth ETF
    Invesco QQQ Trust
    High correlation

The portfolio's assets are highly correlated, meaning they tend to move in the same direction. This limits diversification benefits, as correlated assets often perform similarly during market downturns. To mitigate this risk, consider incorporating assets with lower correlation, such as international equities or bonds. This can enhance diversification and provide a cushion against market volatility, improving overall portfolio stability.

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.

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The portfolio's current allocation may not be on the Efficient Frontier, which represents the best possible risk-return ratio. By optimizing the allocation among existing assets, you can potentially enhance returns without increasing risk. Consider reducing overlap among highly correlated ETFs to improve diversification. This approach can help achieve a more efficient portfolio, maximizing returns for a given level of risk.

Dividends Info

  • Invesco QQQ Trust 0.50%
  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard S&P 500 Growth Index Fund ETF Shares 0.30%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.20%
  • Vanguard Growth Index Fund ETF Shares 0.50%
  • Weighted yield (per year) 0.80%

With a total dividend yield of 0.80%, the portfolio offers modest income through dividends. While growth-oriented portfolios often prioritize capital appreciation over income, dividends can provide a steady cash flow, especially during market downturns. Consider balancing growth and income by adding higher-yielding assets if income generation is a goal. This can provide a safety net and enhance total returns over time.

Ongoing product costs Info

  • Invesco QQQ Trust 0.20%
  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard S&P 500 Growth Index Fund ETF Shares 0.10%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Vanguard Growth Index Fund ETF Shares 0.04%
  • Weighted costs total (per year) 0.07%

The portfolio's total expense ratio (TER) is 0.07%, which is impressively low. This cost efficiency supports better long-term performance by minimizing the drag on returns. Keeping costs low is a crucial aspect of successful investing, as it allows more of your investment to compound over time. Continue to monitor and manage costs effectively to maintain this advantage and maximize portfolio returns.

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