Portfolio with high concentration in technology stocks and low geographic diversification

Report created on Jan 8, 2025

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 weighted towards Apple Inc., which makes up nearly 59% of the total composition. This indicates a significant concentration risk, as the portfolio's performance is largely dependent on the fortunes of a single company. Comparatively, a more balanced portfolio might spread investments across various assets to mitigate such risks. It's advisable to consider redistributing the weight to include more diverse holdings that can provide stability and growth potential, reducing reliance on a single stock's performance.

Growth Info

Historically, the portfolio has performed well with a Compound Annual Growth Rate (CAGR) of 16.54%. This suggests strong past performance, likely driven by the significant allocation to technology stocks. However, the maximum drawdown of -26.38% highlights potential volatility, which can be concerning for risk-averse investors. While past performance can provide insights, it's important to remember that it doesn't guarantee future results. Diversifying the portfolio may help in reducing potential future drawdowns, creating a more stable investment experience.

Projection Info

Monte Carlo simulations project potential future outcomes by using historical data. For this portfolio, 1,000 simulations suggest an annualized return of 15.21%, with a median outcome of 181.03% growth. However, the 5th percentile indicates a potential loss of 71.16%, underscoring the risk of high concentration in a few assets. These projections highlight the importance of diversification to manage risk. While the potential returns are promising, redistributing the portfolio's concentration can help mitigate the downside risk indicated by the simulations.

Asset classes Info

  • Stocks
    100%

The portfolio is predominantly composed of stocks, with over 99% allocation, leaving minimal exposure to other asset classes like bonds or cash. This lack of diversification across asset classes can lead to increased volatility, especially during market downturns. A more diversified portfolio typically includes a mix of stocks, bonds, and possibly other assets, providing a buffer against market fluctuations. Consider incorporating a broader range of asset classes to enhance stability and potentially improve risk-adjusted returns.

Sectors Info

  • Technology
    70%
  • Financials
    5%
  • Health Care
    5%
  • Consumer Discretionary
    3%
  • Telecommunications
    3%
  • Industrials
    3%
  • Consumer Staples
    3%
  • Utilities
    2%
  • Energy
    2%
  • Real Estate
    1%
  • Basic Materials
    1%

The portfolio is heavily concentrated in the technology sector, which accounts for over 70% of the total allocation. While this has likely driven strong past performance, it also exposes the portfolio to sector-specific risks, such as regulatory changes or technological disruptions. A more balanced sector allocation can help mitigate these risks by spreading exposure across different industries. Consider diversifying into sectors like healthcare, consumer goods, or industrials to reduce dependency on technology and enhance overall portfolio resilience.

Regions Info

  • North America
    97%
  • Europe Developed
    1%
  • Asien Schwellenländer
    1%

Geographically, the portfolio is overwhelmingly concentrated in North America, with over 97% exposure. This limited geographic diversification can increase vulnerability to regional economic downturns or policy changes. A more geographically diverse portfolio typically includes investments in Europe, Asia, and emerging markets, which can offer growth opportunities and risk mitigation. Expanding geographic exposure can help balance the portfolio, providing access to global growth trends and reducing reliance on the North American market.

Redundant positions Info

  • VANGUARD 500 INDEX FUND ADMIRAL SHARES
    Vanguard S&P 500 ETF
    Vanguard Total Stock Market Index Fund ETF Shares
    High correlation

The portfolio contains highly correlated assets, particularly among the various S&P 500 and total market index funds. High correlation means these assets tend to move together, limiting diversification benefits. During market downturns, this can result in significant losses, as the lack of diversification fails to offset declines in correlated assets. To enhance diversification, consider replacing some of these highly correlated assets with those that have lower correlation, potentially improving risk management and overall portfolio stability.

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 aims to achieve the best possible risk-return ratio. By reallocating current assets, the portfolio can potentially enhance returns without increasing risk. This process involves analyzing the expected returns and volatility of each asset, seeking an optimal balance. It's important to remember that optimization is based on current assets and doesn't guarantee diversification. Regularly reviewing and adjusting the portfolio can help maintain efficiency as market conditions change.

Dividends Info

  • Apple Inc 0.40%
  • iShares Global Clean Energy ETF 0.80%
  • Vanguard Mega Cap Growth Index Fund ETF Shares 0.40%
  • Global X Renewable Energy Producers ETF 0.70%
  • Schwab U.S. Dividend Equity ETF 3.60%
  • Invesco S&P 500® High Dividend Low Volatility ETF 3.40%
  • Vanguard FTSE All-World ex-US Index Fund ETF Shares 1.60%
  • VANGUARD 500 INDEX FUND ADMIRAL SHARES 1.20%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Vanguard FTSE Emerging Markets Index Fund ETF Shares 3.20%
  • Weighted yield (per year) 0.91%

The portfolio's dividend yield is relatively low at 0.91%, with most of the income generated from ETFs focused on dividends. While dividends can provide a steady income stream, the portfolio's yield is modest compared to income-focused strategies. Investors seeking higher income might explore increasing allocations to high-dividend stocks or funds. However, balancing growth and income is crucial, so any adjustments should consider the overall investment strategy and risk tolerance to maintain a well-rounded portfolio.

Ongoing product costs Info

  • iShares Global Clean Energy ETF 0.41%
  • Vanguard Mega Cap Growth Index Fund ETF Shares 0.07%
  • Global X Renewable Energy Producers ETF 0.65%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • Invesco S&P 500® High Dividend Low Volatility ETF 0.30%
  • Vanguard FTSE All-World ex-US Index Fund ETF Shares 0.07%
  • VANGUARD 500 INDEX FUND ADMIRAL SHARES 0.04%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Vanguard FTSE Emerging Markets Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.03%

The portfolio's costs are impressively low, with a total expense ratio of 0.03%, aligning with best practices for cost efficiency. Low costs can significantly enhance long-term returns, as they reduce the drag on performance. This cost efficiency is a strong point of the portfolio, ensuring more of the investment returns are retained. While the cost structure is already optimized, investors should continue to monitor fees and consider low-cost alternatives when making any future adjustments to maintain this advantage.

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