A growth-focused portfolio with high tech exposure and low geographic diversification

Report created on Jan 12, 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 ETFs and funds, predominantly focusing on large-cap U.S. equities. With 99.7% in stocks, it lacks diversification across different asset classes like bonds or commodities. This composition is typical for growth-focused portfolios but contrasts with balanced portfolios that include more asset variety. For a growth strategy, this allocation is aggressive, aiming for higher returns. However, it also increases exposure to market volatility. To enhance diversification, consider adding other asset classes that can provide stability during market downturns.

Growth Info

Historically, the portfolio has delivered a strong Compound Annual Growth Rate (CAGR) of 16.91%, reflecting its growth orientation. However, it also experienced a significant maximum drawdown of -31.92%, highlighting its susceptibility to market fluctuations. Comparing this to benchmarks like the S&P 500, which typically has a lower drawdown, underscores the portfolio's higher risk-return profile. While past performance is not indicative of future results, it suggests potential for robust returns alongside considerable volatility. Investors should weigh these factors, especially if seeking more stable, consistent growth.

Projection Info

The Monte Carlo simulation, which uses historical data to predict future outcomes, shows potential portfolio growth with a median return of 653.79%. The simulation indicates a high probability of positive returns, with 998 out of 1,000 simulations showing gains. However, it's important to note that simulations rely on past data and assumptions, which may not account for future market changes. While the projections are optimistic, they should be seen as one of many tools for forecasting potential performance. Diversifying the portfolio could help mitigate risks not captured in these simulations.

Asset classes Info

  • Stocks
    100%

The portfolio is almost entirely invested in stocks, with a negligible cash allocation. This heavy stock allocation can lead to greater potential growth but also increases exposure to market volatility. Compared to more diversified portfolios that include bonds or real estate, this allocation lacks balance. While stock-heavy portfolios can perform well in bull markets, they may suffer in downturns. To enhance stability, consider incorporating other asset classes that traditionally have lower correlations with equities, such as bonds, which can provide income and reduce overall portfolio volatility.

Sectors Info

  • Technology
    49%
  • Telecommunications
    9%
  • Financials
    8%
  • Health Care
    8%
  • Consumer Discretionary
    8%
  • Industrials
    5%
  • Consumer Staples
    5%
  • Energy
    2%
  • Consumer Discretionary
    2%
  • Basic Materials
    1%
  • Utilities
    1%
  • Real Estate
    1%

The portfolio shows a significant concentration in the technology sector, comprising nearly 50% of the total allocation. This tech-heavy focus can lead to higher returns during periods of technological innovation but also increases vulnerability to sector-specific risks, such as regulatory changes or tech downturns. Compared to a more balanced sector allocation, this concentration can lead to higher volatility. To manage risk, consider diversifying into underrepresented sectors like utilities or consumer staples, which can provide stability and reduce reliance on the tech sector's performance.

Regions Info

  • North America
    99%
  • Europe Developed
    1%

Geographically, the portfolio is overwhelmingly concentrated in North America, with over 99% of its assets in this region. This limited geographic diversification can expose the portfolio to region-specific economic and political risks. Compared to global benchmarks, which typically have more balanced allocations across regions, this portfolio may miss opportunities in emerging markets or other developed regions. To enhance geographic diversification, consider increasing exposure to international markets, which can provide growth opportunities and help mitigate region-specific risks.

Redundant positions Info

  • Vanguard S&P 500 ETF
    Invesco QQQ Trust
    Vanguard Information Technology Index Fund ETF Shares
    SPDR Dow Jones Industrial Average ETF Trust
    Schwab S&P 500 Index Fund
    Schwab U.S. Large-Cap Growth ETF
    High correlation

The portfolio's assets are highly correlated, particularly among U.S. large-cap equities, including the S&P 500 and tech-focused ETFs. High correlation means that these assets tend to move together, limiting diversification benefits. During market downturns, this can lead to increased volatility and risk. By diversifying with assets that have lower correlations, such as international equities or bonds, the portfolio's overall risk can be reduced. This approach helps in managing volatility and can provide more stable returns over varying market conditions.

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 helps find the best possible risk-return ratio. Currently, the portfolio's high correlation among assets limits diversification benefits. By rebalancing and possibly incorporating less correlated assets, the portfolio could achieve a more efficient allocation. This doesn't necessarily mean adding more assets but adjusting the weights of current holdings to optimize returns for a given level of risk. Regularly reviewing and rebalancing the portfolio can help maintain this optimal balance over time.

Dividends Info

  • SPDR Dow Jones Industrial Average ETF Trust 1.30%
  • Invesco QQQ Trust 0.60%
  • Schwab U.S. Dividend Equity ETF 3.70%
  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • Schwab S&P 500 Index Fund 1.20%
  • Vanguard Information Technology Index Fund ETF Shares 0.60%
  • Vanguard S&P 500 ETF 1.30%
  • Weighted yield (per year) 1.05%

The portfolio's overall dividend yield is 1.05%, with the Schwab U.S. Dividend Equity ETF contributing the highest yield at 3.7%. While dividends can provide a steady income stream, the portfolio's focus is more on growth than income generation. For investors seeking regular income, this yield may be considered modest. To increase dividend income, consider reallocating a portion of the portfolio to higher-yielding assets. However, this should be balanced with growth objectives to ensure that the portfolio continues to meet long-term investment goals.

Ongoing product costs Info

  • SPDR Dow Jones Industrial Average ETF Trust 0.16%
  • Invesco QQQ Trust 0.20%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • Schwab S&P 500 Index Fund 0.02%
  • 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's total expense ratio (TER) is low at 0.08%, which is favorable for long-term performance as lower costs mean more of your returns are retained. This is a positive aspect, as high fees can erode returns over time. Compared to industry averages, this portfolio is cost-efficient, supporting better net returns. However, it's always beneficial to periodically review and compare these costs with similar funds or ETFs to ensure they remain competitive. Maintaining low costs is crucial for maximizing long-term investment growth.

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