Heavily weighted towards technology with significant single-stock concentration

Report created on Dec 16, 2024

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

The portfolio is heavily concentrated, with 67.5% in the Schwab S&P 500 Index Fund and 18% in NVIDIA stock. This creates a strong focus on large-cap U.S. equities with a particular emphasis on technology. While index funds provide broad market exposure, the significant allocation to a single stock like NVIDIA introduces concentration risk. Balancing this with other sectors or asset types can help mitigate potential volatility. Consider diversifying further to reduce reliance on a single company's performance, which could negatively impact the entire portfolio during downturns.

Growth Info

Historically, the portfolio has delivered a remarkable CAGR of 28.85%, although it experienced a maximum drawdown of -44.63%. This indicates strong growth potential but also highlights vulnerability to market downturns. Understanding that past performance is not indicative of future results is essential. The high growth rate suggests the portfolio has benefited from favorable market conditions, particularly in technology. To manage risk, consider strategies like rebalancing or incorporating more defensive assets, which can cushion the impact of market volatility.

Projection Info

The Monte Carlo simulation projects a wide range of outcomes, with a median return of 5,854.13% over the investment horizon. This method uses historical data to simulate future performance, providing a probabilistic view of potential returns. While promising, these projections come with inherent uncertainty, as they assume past trends will continue. It's crucial to remain cautious and not rely solely on optimistic forecasts. Diversifying the portfolio further could help stabilize returns and reduce the risk of underperformance in less favorable market conditions.

Asset classes Info

  • Stocks
    100%

The portfolio is almost entirely composed of equities, with stocks making up 99.74% of the allocation. This heavy reliance on a single asset class heightens exposure to market fluctuations. While equities can offer substantial growth, they also come with increased risk, particularly during economic downturns. Introducing other asset classes, such as bonds or real estate, could enhance diversification and provide a buffer against equity market volatility. A more balanced asset mix aligns with a strategy that seeks to optimize risk-adjusted returns.

Sectors Info

  • Technology
    52%
  • Financials
    9%
  • Health Care
    8%
  • Consumer Discretionary
    7%
  • Industrials
    6%
  • Telecommunications
    6%
  • Consumer Staples
    4%
  • Energy
    3%
  • Utilities
    2%
  • Real Estate
    2%
  • Basic Materials
    1%

With over half the portfolio allocated to technology, sector concentration is evident. This focus can drive growth during tech booms but also exposes the portfolio to sector-specific risks. Other sectors, like financial services and healthcare, are underrepresented, which could limit opportunities for diversification. To mitigate sector risk, consider redistributing some investments into sectors that are less correlated with technology. This approach could provide a more balanced exposure to various economic cycles, enhancing the portfolio's resilience to sector-specific downturns.

Regions Info

  • North America
    98%
  • Asia Emerging
    1%
  • Europe Developed
    1%

The portfolio's geographic exposure is overwhelmingly concentrated in North America, accounting for 97.59% of assets. This lack of international diversification could limit growth opportunities and increase vulnerability to regional economic downturns. Expanding geographic exposure to include more developed and emerging markets can offer access to different economic growth drivers and reduce reliance on the U.S. economy. A more globally diversified portfolio can help capture growth in various regions and provide a hedge against domestic market volatility.

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 along the Efficient Frontier to achieve a better risk-return balance. This involves adjusting the current asset allocation to improve efficiency, meaning obtaining the highest possible return for a given level of risk. By redistributing investments among existing assets, one can potentially enhance returns without increasing risk. However, efficiency does not equate to diversification, so it's crucial to maintain a diversified approach while optimizing. This strategy can help achieve a more balanced and resilient portfolio.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.50%
  • First Trust NASDAQ Cybersecurity ETF 0.40%
  • Weighted yield (per year) 0.09%

The portfolio's dividend yield is relatively low at 0.09%, indicating a focus on growth rather than income. While growth investments can lead to capital appreciation, they may not provide regular income streams. Investors seeking income may consider reallocating a portion of the portfolio to dividend-paying stocks or funds. This shift could enhance cash flow and provide a cushion during periods of market volatility when capital gains are harder to achieve. Balancing growth and income can lead to a more stable long-term investment strategy.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • First Trust NASDAQ Cybersecurity ETF 0.59%
  • Schwab S&P 500 Index Fund 0.02%
  • Weighted costs total (per year) 0.09%

The portfolio's total expense ratio is low at 0.09%, thanks to the Schwab S&P 500 Index Fund's minimal fees. Low costs can improve net returns over time, making this an efficient portfolio from a cost perspective. However, the higher fees of the other ETFs, like the First Trust NASDAQ Cybersecurity ETF at 0.59%, could be optimized by exploring lower-cost alternatives. Keeping costs in check is vital for maximizing investment returns, so regularly reviewing and adjusting fund selections can be beneficial.

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