A tech-heavy growth-focused portfolio with low geographic and sectoral diversification

Report created on Dec 28, 2024

Risk profile

  • Secure
    Speculative

The risk profile, derived from past market volatility, reflects the level of risk the portfolio is exposed to. This assessment helps align your investments with your financial goals and comfort with market fluctuations.

Diversification profile

  • Focused
    Diversified

The diversification assessment evaluates the spread of investments across asset classes, regions, and sectors. This ensures a balanced mix, reducing risk and maximizing returns by not concentrating in any single area.

Positions

The portfolio is composed primarily of common stocks and funds with significant weight in technology. NVIDIA and Microsoft are key holdings, alongside several Vanguard funds. The portfolio leans heavily towards growth-oriented assets, reflecting a higher risk appetite. Compared to a typical balanced portfolio, this one shows a strong preference for equities, with limited diversification across asset classes. To enhance diversification, consider introducing more varied asset types like bonds or alternative investments.

Growth Info

Historically, the portfolio has shown impressive performance with a CAGR of 26.46%, indicating strong growth. However, it also experienced a significant maximum drawdown of -40.79%, highlighting potential volatility. Compared to benchmarks, these figures suggest high returns but also increased risk. It's vital to acknowledge that past performance doesn't guarantee future results, and such volatility might not suit all investors. Consider strategies to mitigate drawdowns, such as diversifying into less volatile asset classes.

Projection Info

Forward projections using Monte Carlo simulations suggest a wide range of outcomes, with an annualized return of 24.55%. Monte Carlo simulations use historical data to explore potential future returns, but they can't predict exact outcomes. The variability in projections emphasizes the portfolio's growth potential and inherent risk. While most simulations indicate positive returns, it's wise to prepare for potential downturns. Regularly revisiting asset allocation and risk tolerance can help manage expectations.

Asset classes Info

  • Stocks
    99%
  • Cash
    1%

The portfolio is heavily weighted in stocks, accounting for over 98% of the assets, with minimal allocation to bonds and other classes. This skew towards equities suggests an aggressive growth strategy, which can lead to higher volatility. Compared to diversified benchmarks, the lack of bonds or other stabilizing assets may increase risk during market downturns. To balance risk, consider adding bonds or other low-correlation assets to cushion against equity market fluctuations.

Sectors Info

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

Sector-wise, the portfolio is dominated by technology, comprising over 62% of the allocation. This concentration can lead to high volatility, especially during tech sector downturns. In comparison to common benchmarks, this allocation is significantly skewed. While tech offers growth potential, diversifying into other sectors like healthcare or consumer staples could reduce risk and provide stability. Evaluating sector trends and potential risks can guide better allocation decisions.

Regions Info

  • North America
    97%
  • Europe Developed
    1%
  • Asia Emerging
    1%

Geographically, the portfolio is overwhelmingly concentrated in North America, with 97% exposure. This limited geographic diversification may increase vulnerability to regional economic downturns. Compared to global benchmarks, the lack of international exposure reduces potential benefits from global growth opportunities. Expanding into international markets could enhance diversification and reduce region-specific risks. Consider assessing global economic trends to identify promising regions for investment.

Redundant positions Info

  • VANGUARD 500 INDEX FUND ADMIRAL SHARES
    VANGUARD GROWTH INDEX FUND ADMIRAL SHARES
    VANGUARD TOTAL STOCK MARKET INDEX FUND ADMIRAL SHARES
    VANGUARD INSTITUTIONAL INDEX FUND INSTITUTIONAL SHARES
    High correlation

The portfolio includes several highly correlated assets, particularly among Vanguard funds. High correlation means these assets often move in tandem, limiting diversification benefits. During market downturns, correlated assets may all decline simultaneously, increasing portfolio risk. To enhance diversification, consider replacing some correlated holdings with assets that have lower correlation, providing better risk management and potential for smoother returns over time.

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 on the Efficient Frontier, which seeks the best risk-return balance. This involves adjusting asset weights to maximize returns for a given risk level. While the current allocation shows strong growth potential, refining it could enhance efficiency. It's important to note that optimization focuses on risk-return balance and may not address other goals like diversification. Consider consulting with a financial advisor to explore optimization opportunities.

Dividends Info

  • BlackRock Hi Yld Bd Blkrock Cl 6.50%
  • Eli Lilly and Company 0.70%
  • Microsoft Corporation 0.70%
  • Taiwan Semiconductor Manufacturing 0.90%
  • VANGUARD 500 INDEX FUND ADMIRAL SHARES 1.20%
  • VANGUARD GROWTH INDEX FUND ADMIRAL SHARES 0.30%
  • VANGUARD INSTITUTIONAL INDEX FUND INSTITUTIONAL SHARES 1.20%
  • VANGUARD TOTAL STOCK MARKET INDEX FUND ADMIRAL SHARES 1.20%
  • Weighted yield (per year) 0.48%

The portfolio's overall dividend yield is low at 0.48%, reflecting its growth focus. While dividends provide steady income, growth-oriented portfolios often prioritize capital appreciation. For investors seeking income, higher-yielding assets might be more suitable. However, for growth-focused strategies, reinvesting any dividends can compound returns. Consider whether the current yield aligns with your income needs and investment goals.

Ongoing product costs Info

  • BlackRock Hi Yld Bd Blkrock Cl 0.48%
  • FIDELITY ADVISOR TECHNOLOGY FUND CLASS I 0.68%
  • FIDELITY ADVISOR DIVERSIFIED INTERNATIONAL FUND CLASS I 0.93%
  • FIDELITY ADVISOR NEW INSIGHTS FUND CLASS I 0.40%
  • EAGLE MID CAP GROWTH FUND CLASS A 1.05%
  • JPMORGAN LARGE CAP GROWTH FUND CLASS R6 0.44%
  • VANGUARD 500 INDEX FUND ADMIRAL SHARES 0.04%
  • VANGUARD GROWTH INDEX FUND ADMIRAL SHARES 0.05%
  • VANGUARD INSTITUTIONAL INDEX FUND INSTITUTIONAL SHARES 0.04%
  • VANGUARD TOTAL STOCK MARKET INDEX FUND ADMIRAL SHARES 0.04%
  • Weighted costs total (per year) 0.17%

The portfolio's costs are impressively low, with a Total Expense Ratio (TER) of 0.17%. Low costs support better long-term performance, as they reduce the drag on returns. Compared to many actively managed portfolios, these costs are competitive. Maintaining this cost efficiency is beneficial, but it's also important to ensure that low costs don't come at the expense of diversification or risk management. Regularly review fund expenses to ensure they remain aligned with your strategy.

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