Growth-focused portfolio with high concentration in North American equities and tech sector exposure

Report created on Dec 16, 2024

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

The portfolio is dominated by three ETFs, with the Vanguard S&P 500 UCITS Acc making up 60% of the allocation. This is followed by the Invesco EQQQ NASDAQ-100 UCITS ETF at 25% and the iShares MSCI World Small Cap UCITS ETF at 15%. This composition suggests a strong focus on large-cap U.S. equities, particularly within the technology sector. The portfolio's structure is heavily weighted towards equities, with minimal exposure to other asset classes like cash and bonds. While this setup can drive growth, it also exposes the portfolio to higher volatility. A more balanced mix could enhance stability and reduce risk.

Growth Info

Historically, the portfolio has delivered a robust compound annual growth rate (CAGR) of 17.15%. This impressive performance is largely due to the strong returns from U.S. equities, particularly in the tech sector. However, it's important to note the maximum drawdown of nearly 25%, indicating significant potential losses during market downturns. While past performance can provide insights, it doesn't guarantee future results. Investors should consider whether they can tolerate similar volatility in the future. Diversifying across more asset classes could help mitigate such drawdowns.

Projection Info

The Monte Carlo simulation, a statistical method that uses historical data to project future outcomes, suggests a median potential growth of 687.98% for the portfolio. While this demonstrates potential for substantial returns, it's crucial to remember that simulations rely on past data and assume market conditions remain constant. They can't predict unforeseen events or shifts in market dynamics. Investors should use these projections as one of many tools in decision-making, rather than relying on them exclusively. Regular portfolio reviews and adjustments are recommended to align with evolving market conditions.

Asset classes Info

  • Stocks
    100%

The portfolio is almost entirely composed of equities, with a negligible allocation to cash and bonds. This heavy equity weighting suggests a focus on capital appreciation rather than income generation or capital preservation. While equities can offer high returns, they also come with increased volatility. A more diversified allocation across different asset classes, such as bonds or real estate, could help reduce overall portfolio risk. Incorporating a mix of asset classes might provide more consistent returns and cushion against market downturns.

Sectors Info

  • Technology
    34%
  • Consumer Discretionary
    12%
  • Financials
    10%
  • Telecommunications
    10%
  • Health Care
    10%
  • Industrials
    8%
  • Consumer Staples
    6%
  • Energy
    3%
  • Real Estate
    3%
  • Basic Materials
    2%
  • Utilities
    2%

With 34% of the portfolio invested in the technology sector, there is a significant concentration risk. Other sectors like consumer cyclicals, financial services, and healthcare have smaller allocations. This tech-heavy tilt can lead to high returns during tech booms but also exposes the portfolio to sector-specific risks. A more balanced sector allocation could enhance diversification and mitigate the impact of sector downturns. Investors might consider rebalancing to achieve a more even distribution across sectors, reducing reliance on any single industry.

Regions Info

  • North America
    94%
  • Europe Developed
    3%
  • Japan
    2%
  • Australasia
    1%

The portfolio shows a strong geographic bias towards North American equities, which account for over 94% of the allocation. This concentration exposes the portfolio to risks associated with the U.S. market, such as economic or political changes. A more geographically diversified portfolio could reduce these risks and provide exposure to growth opportunities in other regions. Incorporating investments from Europe, Asia, or emerging markets might help balance the geographic exposure and enhance potential returns.

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.

An analysis using the Efficient Frontier indicates that the portfolio could be optimized for a better risk-return ratio. Currently, the portfolio's expected return is lower than the optimal portfolio's 21.02% with a similar risk level. By adjusting the allocation among existing assets, the portfolio could achieve a more efficient balance. This involves reallocating towards assets that offer better returns for the same level of risk. While achieving perfect efficiency isn't always possible, striving for a more optimal allocation can improve long-term performance.

Ongoing product costs Info

  • Invesco EQQQ NASDAQ-100 UCITS ETF 0.35%
  • Vanguard S&P 500 UCITS Acc 0.07%
  • iShares MSCI World Small Cap UCITS ETF USD (Acc) 0.35%
  • Weighted costs total (per year) 0.18%

The total expense ratio (TER) of the portfolio is 0.18%, which is relatively low and helps enhance net returns over time. The Vanguard S&P 500 UCITS Acc ETF offers the lowest cost at 0.07%, while the other two ETFs have higher fees of 0.35%. Keeping costs low is crucial for maximizing long-term returns, as fees can significantly erode gains. Investors should regularly review their portfolio's cost structure and consider lower-cost alternatives if available. Reducing expenses can lead to better compounding of returns over the investment horizon.

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