Growth-Oriented Portfolio with Broad Diversification and High Tech Exposure for Risk-Tolerant Investors

Report created on Nov 24, 2024

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

4/5
Broadly Diversified
Less diversification More diversification

Positions

The portfolio predominantly consists of three ETFs: Schwab U.S. Large-Cap Growth ETF at 50%, Vanguard Total International Stock Index Fund ETF at 30%, and Invesco NASDAQ 100 ETF at 20%. This composition indicates a strong focus on growth stocks, particularly within the U.S. market. The inclusion of an international index fund provides some global diversification. This setup is suitable for investors seeking growth through equities, but it may lack exposure to other asset classes like bonds or real estate, which could help balance risk.

Growth Info

Historically, the portfolio has demonstrated a CAGR of 14.06%, indicating strong growth over time. However, it experienced a significant max drawdown of -32.56%, highlighting its vulnerability during market downturns. The fact that 90% of returns were generated in just 15 days suggests that the portfolio's performance is highly concentrated in short periods of market activity. This emphasizes the importance of timing and the potential volatility associated with such growth-focused investments. Investors should be prepared for both the highs and lows that come with this strategy.

Projection Info

Using a Monte Carlo simulation with 1,000 iterations, the portfolio's future performance was projected. Assuming a hypothetical initial investment, the simulations revealed a median (50th percentile) growth of 419.45%, with a 5th percentile at 44.62% and a 67th percentile at 630.1%. The annualized return across all simulations was 14.57%. This simulation highlights the potential for substantial growth, but also underscores the uncertainty and variability inherent in market investments. While the majority of simulations showed positive returns, the range of outcomes suggests that investors should be prepared for different scenarios.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily weighted toward stocks, with 99.52% of assets in equities. This allocation reflects a high-risk, high-reward strategy, as stocks typically offer greater growth potential compared to other asset classes. However, the lack of diversification into bonds or alternative investments may expose the portfolio to significant volatility. Investors looking to mitigate risk might consider introducing more balanced asset classes like fixed income or commodities to cushion against market fluctuations and provide a more stable return profile.

Sectors Info

  • Technology
    38%
  • Consumer Discretionary
    12%
  • Telecommunications
    11%
  • Financials
    10%
  • Health Care
    9%
  • Industrials
    7%
  • Consumer Staples
    4%
  • Basic Materials
    3%
  • Energy
    2%
  • Utilities
    2%
  • Real Estate
    1%

The sector allocation is dominated by technology at 38.25%, followed by consumer cyclicals and communication services. This concentration in tech suggests a bet on the continued growth of this sector, which has been a strong performer historically. However, it also increases exposure to sector-specific risks. The portfolio does include a variety of other sectors, albeit at lower percentages, providing some diversification. Investors might want to reassess the sector balance to ensure it aligns with their risk tolerance and long-term market outlook, potentially reducing sector concentration.

Regions Info

  • North America
    72%
  • Europe Developed
    12%
  • Asia Emerging
    5%
  • Japan
    5%
  • Asia Developed
    3%
  • Australasia
    2%
  • Africa/Middle East
    1%
  • Latin America
    1%

Geographically, the portfolio is heavily focused on North America, with 71.75% of assets allocated there. While this reflects a strong reliance on the U.S. market, the inclusion of international exposure through Europe, Asia, and other regions provides some global diversification. However, emerging markets are underrepresented, which might limit growth opportunities in rapidly developing economies. Investors could consider increasing exposure to these regions to capture potential growth, while being mindful of the associated risks and volatility. A more balanced geographic allocation could enhance diversification.

Redundant positions Info

  • Invesco NASDAQ 100 ETF
    Schwab U.S. Large-Cap Growth ETF
    High correlation

The portfolio exhibits high correlation between the Invesco NASDAQ 100 ETF and the Schwab U.S. Large-Cap Growth ETF. This correlation suggests that these assets tend to move in similar directions, reducing the diversification benefit. While both ETFs have delivered strong returns, relying heavily on correlated assets can increase vulnerability to market downturns. Investors should consider diversifying with assets that have low correlation to each other, potentially introducing different asset classes or sectors to achieve a more balanced risk-return profile.

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.

Before optimizing the portfolio, it's crucial to address the high correlation between current assets, which limits diversification benefits. The efficient frontier suggests that by diversifying into less correlated assets, the portfolio could achieve a better risk-return balance. Moving along the frontier allows for adjusting the portfolio towards either a riskier or more conservative stance. For a riskier portfolio, increase allocation to equities; for a more conservative one, consider adding bonds or other low-volatility assets. Focus on enhancing diversification to optimize the portfolio's performance.

Dividends Info

  • Invesco NASDAQ 100 ETF 0.60%
  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • Vanguard Total International Stock Index Fund ETF Shares 3.00%
  • Weighted yield (per year) 1.22%

The portfolio's dividend yield stands at 1.22%, with the Vanguard Total International Stock Index Fund ETF being the primary contributor at 3.0%. This yield is relatively modest, reflecting the growth-oriented nature of the portfolio. While dividends provide a steady income stream, the focus here is clearly on capital appreciation. Investors seeking higher income might explore dividend-focused funds or stocks. However, for those prioritizing growth, the current yield aligns with the overall strategy. Balancing growth and income could be a future consideration based on evolving financial goals.

Ongoing product costs Info

  • Invesco NASDAQ 100 ETF 0.15%
  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.07%

The portfolio benefits from low total expense ratios, with an overall TER of 0.07%. This cost efficiency is advantageous for long-term growth as lower fees mean more of the returns are retained by the investor. The individual ETFs also have competitive expense ratios, with Schwab U.S. Large-Cap Growth ETF at 0.04%, Vanguard Total International Stock Index Fund ETF at 0.08%, and Invesco NASDAQ 100 ETF at 0.15%. Keeping costs low is crucial for maximizing net returns, and this portfolio is well-positioned in that regard. Investors should continue to monitor fees to ensure they remain competitive.

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