A concentrated growth-focused portfolio with significant technology sector exposure and limited geographic diversity

Report created on Jan 7, 2025

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

This portfolio is heavily weighted towards ETFs, particularly the Vanguard ESG US Stock ETF, which makes up over 68% of the total allocation. The remaining investments include a significant stake in the technology sector, with the Vanguard Information Technology Index Fund ETF Shares and individual stocks like Apple Inc. and Rivian Automotive Inc. This composition leans heavily towards equities with minimal cash holdings. Compared to a typical growth portfolio, this one shows a high concentration in a few assets, which may limit diversification benefits. To enhance diversification, consider introducing other asset classes like bonds or international equities.

Growth Info

Historically, the portfolio has performed well with a Compound Annual Growth Rate (CAGR) of 9.55%, indicating strong growth over time. However, it has experienced significant volatility, with a maximum drawdown of -33.05%, meaning there have been periods of substantial losses. This level of volatility is common in growth-focused portfolios but highlights the importance of understanding risk tolerance. If you are comfortable with such fluctuations, maintaining the current strategy could be suitable. Otherwise, consider diversifying to reduce potential downside risks.

Projection Info

The Monte Carlo simulation, which uses historical data to project future performance, suggests mixed outcomes for this portfolio. With 1,000 simulations, only 387 resulted in positive returns, and the median outcome was a -32.56% return. This indicates potential volatility and uncertainty in future performance. While the simulation provides a range of potential outcomes, it's important to remember that past performance doesn't guarantee future results. To improve potential outcomes, consider adjusting asset allocations for better risk management.

Asset classes Info

  • Stocks
    100%

The portfolio is almost entirely composed of stocks, with over 99% allocation, and a negligible amount in cash. This single asset class focus suggests a high-risk, high-reward strategy typical of growth-oriented portfolios. While stocks offer growth potential, they also come with increased volatility compared to a more balanced asset allocation. Introducing other asset classes like bonds could provide stability and reduce overall portfolio risk, enhancing diversification and potentially smoothing returns over time.

Sectors Info

  • Technology
    49%
  • Consumer Discretionary
    15%
  • Financials
    10%
  • Health Care
    8%
  • Telecommunications
    7%
  • Industrials
    4%
  • Consumer Staples
    3%
  • Real Estate
    2%
  • Basic Materials
    1%

Technology dominates this portfolio, accounting for nearly half of the total allocation. This concentration reflects a bet on the continued growth of the tech sector, which can lead to higher volatility, especially during periods of regulatory changes or interest rate hikes. Other sectors like consumer cyclicals and financial services hold smaller positions. To mitigate sector-specific risks, consider diversifying into underrepresented sectors, which could provide balance and reduce exposure to sector-specific downturns.

Regions Info

  • North America
    99%
  • Europe Developed
    1%

The portfolio's geographic exposure is heavily skewed towards North America, with over 98% allocation. This limited geographic diversity may expose the portfolio to risks specific to the North American market, such as economic downturns or policy changes. A more globally diversified portfolio could help mitigate these risks and capture growth opportunities in other regions. Consider adding exposure to developed and emerging markets outside North America to enhance geographic diversification.

Redundant positions Info

  • Vanguard Information Technology Index Fund ETF Shares
    Vanguard S&P 500 ETF
    Vanguard ESG US Stock
    High correlation

The portfolio's assets show high correlation, especially among the ETFs, which limits diversification benefits. Highly correlated assets tend to move together, meaning the portfolio could experience significant swings during market downturns. To improve diversification, consider reducing holdings in overlapping ETFs and introducing assets with lower correlations. This can help manage risk and potentially improve risk-adjusted returns, especially during volatile market periods.

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 be optimized using the Efficient Frontier, which suggests a more efficient allocation with a potential return of 20.17% at a similar risk level. However, this optimal portfolio also carries a higher risk level of 27.02%. To achieve better risk-return efficiency, focus on reducing highly correlated assets and exploring alternative allocations. This approach can help balance risk and return, potentially improving the portfolio's performance without increasing overall risk.

Dividends Info

  • Apple Inc 0.40%
  • Vanguard ESG US Stock 0.80%
  • Vanguard Information Technology Index Fund ETF Shares 0.60%
  • Vanguard S&P 500 ETF 1.20%
  • Weighted yield (per year) 0.71%

The portfolio's overall dividend yield is relatively low at 0.71%, reflecting its growth focus. Dividend income plays a minor role in this strategy, with the Vanguard S&P 500 ETF offering the highest yield at 1.2%. For investors seeking income, this portfolio may not meet those needs. If income generation is a goal, consider adding high-dividend-paying stocks or ETFs to enhance the portfolio's yield, balancing growth with income.

Ongoing product costs Info

  • Vanguard ESG US Stock 0.09%
  • Vanguard Information Technology Index Fund ETF Shares 0.10%
  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.08%

The portfolio benefits from low costs, with a total expense ratio (TER) of 0.08%. This aligns with best practices, as lower costs can significantly enhance long-term returns by reducing the drag on performance. Vanguard's ETFs are known for their cost efficiency, contributing to this favorable cost structure. Maintaining low costs is crucial for maximizing returns, so continue monitoring expenses and consider replacing any high-fee assets with more cost-effective alternatives.

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