A growth-focused tech-heavy portfolio with high risk and limited diversification

Report created on Jan 1, 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 technology stocks, with Microsoft alone comprising over 43% of the total. This concentration in a single sector and stock limits diversification, potentially increasing risk during sector downturns. A more balanced portfolio typically includes a mix of stocks, bonds, and alternative investments. To reduce risk, consider diversifying into other asset classes or sectors, which can help smooth returns over time.

Growth Info

Historically, the portfolio has delivered a strong CAGR of 19.5%, indicating robust growth. However, the max drawdown of -36.64% highlights significant volatility. While past performance can be encouraging, it's crucial to remember that it doesn't guarantee future results. Diversifying into less volatile assets may help mitigate large drawdowns, providing a more stable return profile.

Projection Info

Monte Carlo simulations project potential future outcomes using historical data. With a 50th percentile return of 12.79% and a 67th percentile return of 297.17%, the portfolio shows a wide range of possible outcomes. However, the 5th percentile indicates potential for a near-total loss. This underscores the importance of diversification and risk management, as relying on historical trends alone can be misleading.

Asset classes Info

  • Stocks
    100%

The portfolio is almost entirely composed of stocks, with a negligible cash position. This lack of asset class diversity can lead to heightened risk, as stock markets are prone to volatility. Typical benchmarks suggest including bonds or other assets to balance risk and return. Consider reallocating a portion of the portfolio into fixed income or alternative investments to provide stability.

Sectors Info

  • Technology
    75%
  • Consumer Discretionary
    12%
  • Financials
    4%
  • Telecommunications
    3%
  • Industrials
    3%
  • Health Care
    1%
  • Consumer Staples
    1%

With nearly 75% of the portfolio in technology, there's a significant sector concentration risk. While tech has been a strong performer, it can be volatile, especially during economic shifts. A more diversified sector allocation, including consumer staples or healthcare, could reduce risk and provide more balanced growth. Aligning sector weights more closely with common benchmarks could enhance stability.

Regions Info

  • North America
    100%

The portfolio is overwhelmingly invested in North America, with minimal exposure to other regions. This geographic concentration can limit the benefits of global diversification, such as reduced risk and exposure to growth opportunities abroad. Expanding investments into Europe or Asia could enhance diversification and potentially improve risk-adjusted returns, aligning more closely with global benchmarks.

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 using the Efficient Frontier to achieve a better risk-return ratio. The current setup has room for improvement, as the optimal portfolio indicates a higher expected return at a similar risk level. By rebalancing existing assets, the portfolio could potentially achieve greater efficiency, though it's important to balance this with diversification needs.

Dividends Info

  • Apple Inc 0.40%
  • Alphabet Inc Class C 0.30%
  • Microsoft Corporation 0.70%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Weighted yield (per year) 0.53%

The portfolio's dividend yield is relatively low at 0.53%, reflecting its growth orientation. Dividends can provide a steady income stream and enhance total returns, especially in volatile markets. Consider adding dividend-paying stocks or funds to increase income potential and provide a cushion during market downturns, without significantly altering the growth focus.

Ongoing product costs Info

  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%

With a low expense ratio of 0.03% in the Vanguard ETF, the portfolio is cost-efficient. Low costs are beneficial as they enhance net returns over time. However, it's essential to ensure that other holdings also maintain low expense ratios. Regularly reviewing and optimizing for cost efficiency can improve long-term performance without sacrificing other investment goals.

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