A growth-focused US-heavy portfolio with significant tech concentration and moderate diversification

Report created on Jan 4, 2025

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

This portfolio is composed entirely of ETFs with a strong emphasis on U.S. equities, particularly in the technology sector. The Vanguard Total Stock Market Index Fund ETF Shares holds the largest portion at 40.26%, providing broad market exposure. In comparison to typical growth portfolios, this one is heavily weighted towards technology, which can amplify both potential returns and risks. A balanced growth portfolio often includes a mix of equities and bonds, but this one is almost entirely equity-focused. To enhance diversification, consider incorporating different asset classes like bonds or real estate investment trusts (REITs).

Growth Info

The portfolio has demonstrated a strong historical performance with a Compound Annual Growth Rate (CAGR) of 19.1%. This is impressive and suggests robust growth potential, but it's essential to note the high maximum drawdown of -33.81%. This indicates significant volatility, which is common in growth-oriented portfolios. When compared to a benchmark like the S&P 500, which has a lower average annual return, this portfolio's performance is commendable. However, past performance does not guarantee future results, and investors should be prepared for potential fluctuations in value.

Projection Info

The forward projection using Monte Carlo simulation reveals a wide range of potential outcomes for this portfolio. With 1,000 simulations, the 5th percentile outcome shows a 153.59% return, while the 50th and 67th percentiles suggest returns of 1,089.6% and 1,752.24%, respectively. This method uses historical data to model future performance, but it's important to remember that these are hypothetical scenarios and not predictions. The high potential returns are promising, yet they are accompanied by inherent risks. Regularly reviewing and adjusting the portfolio can help manage these risks over time.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily concentrated in equities, with stocks making up 99.83% of the allocation. This single asset class focus can lead to increased volatility, especially during market downturns. While equities offer growth potential, diversifying into other asset classes like bonds or commodities can help smooth out returns and reduce overall risk. A more balanced allocation could better align with a moderately diversified strategy, providing a cushion against market fluctuations.

Sectors Info

  • Technology
    62%
  • Consumer Discretionary
    7%
  • Telecommunications
    7%
  • Health Care
    6%
  • Financials
    6%
  • Industrials
    4%
  • Consumer Staples
    3%
  • Energy
    2%
  • Utilities
    1%
  • Real Estate
    1%
  • Basic Materials
    1%

Technology dominates the sector allocation, comprising 61.87% of the portfolio. This concentration can lead to higher volatility, especially during periods of tech market instability. Other sectors, such as consumer cyclicals and communication services, are significantly less represented. A well-diversified portfolio typically includes a broader range of sectors to mitigate sector-specific risks. Consider increasing exposure to underrepresented sectors like healthcare or financial services to achieve a more balanced sectoral distribution.

Regions Info

  • North America
    95%
  • Asia Developed
    3%
  • Europe Developed
    2%

The geographic allocation is heavily skewed towards North America, accounting for 94.95% of the portfolio. This concentration may limit the benefits of international diversification, which can reduce risk by spreading investments across different economic regions. A more balanced geographic exposure could include greater representation from developed and emerging markets outside of North America. This adjustment could enhance diversification and potentially improve risk-adjusted returns over the long term.

Redundant positions Info

  • Invesco NASDAQ 100 ETF
    Vanguard Information Technology Index Fund ETF Shares
    High correlation

The portfolio contains highly correlated assets, particularly between the Invesco NASDAQ 100 ETF and Vanguard Information Technology Index Fund ETF Shares. This correlation implies that these assets tend to move in tandem, which may limit diversification benefits. During market downturns, highly correlated assets can exacerbate losses. Reducing overlap by choosing less correlated investments can enhance diversification and improve risk management. Consider incorporating assets with lower correlation to the existing holdings to achieve this balance.

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 benefit from optimization using the Efficient Frontier, which identifies the best possible risk-return ratio for a given set of assets. By adjusting the weights of current holdings, you can achieve a more efficient allocation without necessarily adding new assets. This process involves maximizing returns for a given level of risk or minimizing risk for a given level of return. Consider consulting with a financial advisor to explore optimization strategies that align with your investment goals and risk tolerance.

Dividends Info

  • Invesco NASDAQ 100 ETF 0.60%
  • Vanguard Information Technology Index Fund ETF Shares 0.60%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Weighted yield (per year) 0.76%

The portfolio's dividend yield is modest at 0.76%, reflecting its growth-oriented nature. Dividend income can provide a steady cash flow, which is often sought by income-focused investors. However, growth portfolios typically prioritize capital appreciation over dividend income. If income generation is a goal, consider reallocating a portion of the portfolio to higher-yielding assets. This could include dividend-focused ETFs or stocks with a consistent history of dividend payments, balancing growth with income.

Ongoing product costs Info

  • Invesco NASDAQ 100 ETF 0.15%
  • VanEck Semiconductor ETF 0.35%
  • Vanguard Information Technology Index Fund ETF Shares 0.10%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Weighted costs total (per year) 0.13%

The portfolio's total expense ratio (TER) is relatively low at 0.13%, which is advantageous for long-term performance. Lower costs mean more of your investment returns remain in your pocket, compounding over time. The Vanguard Total Stock Market Index Fund ETF Shares, with a TER of 0.03%, is particularly cost-effective. However, the VanEck Semiconductor ETF has a higher expense ratio of 0.35%. Evaluate whether lower-cost alternatives could replace higher-fee assets, potentially improving net returns without sacrificing strategy.

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