A tech-focused growth portfolio with significant sector concentration and moderate geographic diversification

Report created on Jan 9, 2025

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

This portfolio is heavily concentrated in technology, with a significant portion allocated to the Fidelity Select Semiconductors Portfolio and Technology Select Sector SPDR® Fund. Together, these make up over 40% of the portfolio, indicating a strong focus on growth assets. Compared to a typical balanced portfolio, this one is less diversified, with a large emphasis on a single sector. Such concentration can lead to higher volatility, which may not align with the risk tolerance of all investors. Consider gradually diversifying into other sectors to reduce potential risks associated with market fluctuations.

Growth Info

Historically, this portfolio has performed well, with a Compound Annual Growth Rate (CAGR) of 17.98%, significantly outpacing many benchmarks. However, the maximum drawdown of -33.68% highlights potential volatility during market downturns. While past performance can offer insights, it does not guarantee future results. Investors should weigh the impressive returns against the potential for significant losses. To mitigate risk, consider introducing more defensive assets that can provide stability during market corrections.

Projection Info

Monte Carlo simulations, which use historical data to forecast future outcomes, show a wide range of potential returns for this portfolio. The simulations suggest a median growth of 401.23% but also highlight the risk of lower-than-expected returns, with a 5th percentile projection of just 5.1%. While these projections provide a useful framework, they are not foolproof, as they rely on past data. It's essential to regularly reassess the portfolio's alignment with personal goals and risk tolerance, especially during volatile market conditions.

Asset classes Info

  • Stocks
    99%
  • Real Estate
    1%

The portfolio is overwhelmingly composed of stocks, accounting for nearly 99% of the allocation, with minimal exposure to bonds, real estate, and cash. This heavy stock weighting suggests a high-risk, high-reward strategy typical of growth-focused portfolios. While stocks can drive significant returns, they also introduce volatility. To enhance diversification, consider incorporating more bonds or other asset classes, which can offer stability and income, balancing the growth potential with risk management.

Sectors Info

  • Technology
    48%
  • Financials
    12%
  • Telecommunications
    10%
  • Consumer Discretionary
    9%
  • Health Care
    8%
  • Industrials
    6%
  • Consumer Staples
    3%
  • Energy
    1%
  • Real Estate
    1%
  • Utilities
    1%
  • Basic Materials
    1%

With nearly half of the portfolio in technology, there's a notable sector concentration, which can lead to increased volatility, especially during tech market corrections. Other sectors like financial services and communication services offer some balance but are still overshadowed by the tech allocation. This concentration can be risky if the tech sector underperforms. To mitigate this risk, consider rebalancing to include more diverse sectors, potentially enhancing the portfolio's resilience to sector-specific downturns.

Regions Info

  • North America
    95%
  • Europe Developed
    3%
  • Asia Developed
    2%

The portfolio is predominantly invested in North American assets, comprising over 94% of the holdings. While this provides familiarity and stability, it limits exposure to potential growth opportunities in other regions. A more geographically diverse portfolio can mitigate regional economic risks and tap into growth in emerging markets. Consider gradually increasing allocations to Europe, Asia, or emerging markets to capture global growth trends and reduce reliance on North American market performance.

Redundant positions Info

  • Technology Select Sector SPDR® Fund
    SPDR® Portfolio S&P 500 Growth ETF
    High correlation

The portfolio contains highly correlated assets, particularly within the technology sector, which can reduce diversification benefits. When assets move in tandem, the portfolio is more susceptible to sector-specific downturns. For example, the Technology Select Sector SPDR® Fund and SPDR® Portfolio S&P 500 Growth ETF have shown high correlation, limiting diversification. To enhance diversification, consider reducing exposure to overlapping assets and introducing uncorrelated investments that can perform independently during market shifts.

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 seeks the best risk-return balance. Currently, the focus on technology limits diversification. By adjusting allocations among existing assets, the portfolio can achieve a more efficient risk-return ratio. This involves assessing the potential returns and risks of each asset and reallocating to maximize returns for a given level of risk. Consider consulting with a financial advisor to explore rebalancing strategies that align with long-term objectives.

Dividends Info

  • SPDR® Portfolio S&P 500 Growth ETF 0.60%
  • Materials Select Sector SPDR® Fund 1.40%
  • Communication Services Select Sector SPDR® Fund 0.70%
  • Energy Select Sector SPDR® Fund 3.30%
  • Financial Select Sector SPDR® Fund 1.40%
  • Industrial Select Sector SPDR® Fund 0.90%
  • Technology Select Sector SPDR® Fund 0.50%
  • Consumer Staples Select Sector SPDR® Fund 2.00%
  • The Real Estate Select Sector SPDR Fund 3.50%
  • Utilities Select Sector SPDR® Fund 2.90%
  • Health Care Select Sector SPDR® Fund 1.20%
  • Consumer Discretionary Select Sector SPDR® Fund 0.50%
  • Weighted yield (per year) 0.68%

The portfolio's dividend yield is relatively low at 0.68%, reflecting its growth-oriented nature. Dividend-paying assets, like the Real Estate and Utilities funds, contribute to income but are minor components. While growth stocks can offer substantial capital appreciation, dividends provide steady income and can buffer against market volatility. If income generation is a goal, consider increasing allocations to higher-yielding sectors or funds, balancing growth potential with income stability.

Ongoing product costs Info

  • Fidelity Select Semiconductors Portfolio 0.65%
  • SPDR® Portfolio S&P 500 Growth ETF 0.04%
  • Materials Select Sector SPDR® Fund 0.09%
  • Communication Services Select Sector SPDR® Fund 0.09%
  • Energy Select Sector SPDR® Fund 0.09%
  • Financial Select Sector SPDR® Fund 0.09%
  • Industrial Select Sector SPDR® Fund 0.09%
  • Technology Select Sector SPDR® Fund 0.09%
  • Consumer Staples Select Sector SPDR® Fund 0.09%
  • The Real Estate Select Sector SPDR Fund 0.09%
  • Utilities Select Sector SPDR® Fund 0.09%
  • Health Care Select Sector SPDR® Fund 0.09%
  • Consumer Discretionary Select Sector SPDR® Fund 0.09%
  • Weighted costs total (per year) 0.22%

With a Total Expense Ratio (TER) of 0.22%, this portfolio is cost-effective, especially considering the low fees of most ETFs. However, the Fidelity Select Semiconductors Portfolio has a relatively high expense ratio of 0.65%. High fees can erode returns over time, impacting long-term performance. To optimize costs, evaluate whether lower-cost alternatives could achieve similar exposure, particularly within the semiconductor sector. Reducing expenses can significantly enhance net returns over the investment horizon.

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