A concentrated U.S.-focused portfolio with high tech exposure and limited diversification

Report created on Jan 24, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

The portfolio is heavily weighted towards ETFs, with the Vanguard S&P 500 ETF and Invesco NASDAQ 100 ETF making up nearly all of the allocation. This composition suggests a strong focus on large-cap U.S. equities. While these ETFs provide exposure to a wide range of companies, the lack of diversification across asset classes and geographic regions could be a drawback. A more balanced allocation could help mitigate risks associated with market volatility. Consider adding different asset classes or international equities to enhance diversification and align more closely with a balanced portfolio profile.

Growth Info

Historically, the portfolio has performed well, with a Compound Annual Growth Rate (CAGR) of 15.93%. This impressive growth rate indicates strong past performance, especially considering the S&P 500's historical average. However, the maximum drawdown of -27.49% highlights potential volatility. Comparing this to a benchmark like the S&P 500 can provide context, but remember that past performance doesn't guarantee future results. To smooth out returns, consider incorporating assets that can provide stability during downturns and reduce overall volatility.

Projection Info

The Monte Carlo simulation, using historical data to project future outcomes, suggests a range of potential returns. With a median projected return of 100.5% and 763 out of 1,000 simulations showing positive outcomes, the outlook is generally favorable. However, the 5th percentile projects a significant loss, emphasizing the importance of diversification to manage downside risk. Remember, these projections are not guarantees and rely on historical data, which may not reflect future market conditions. Diversifying the portfolio can help mitigate risks and improve the likelihood of achieving desired outcomes.

Asset classes Info

  • Stocks
    100%

The portfolio is entirely composed of stocks, which limits diversification benefits. While equities can offer growth potential, relying solely on this asset class can increase exposure to market volatility. Diversification across asset classes, such as bonds or real estate, could provide a buffer during market downturns and improve risk-adjusted returns. Compare this allocation to a balanced benchmark, which typically includes a mix of stocks and bonds, to assess potential improvements in diversification and risk management.

Sectors Info

  • Technology
    38%
  • Consumer Discretionary
    12%
  • Telecommunications
    11%
  • Health Care
    10%
  • Financials
    10%
  • Industrials
    6%
  • Consumer Staples
    6%
  • Energy
    3%
  • Utilities
    2%
  • Basic Materials
    2%
  • Real Estate
    2%

The portfolio is heavily concentrated in the technology sector, making up 38% of the allocation. This tech-heavy focus can lead to higher volatility, especially during interest rate hikes or tech market fluctuations. While technology has driven strong returns in recent years, consider balancing the sector exposure to reduce risk. Diversifying into sectors like healthcare, consumer staples, or utilities can provide stability and align the portfolio more closely with a balanced sector allocation, improving resilience against sector-specific downturns.

Regions Info

  • North America
    99%
  • Europe Developed
    1%

With 99% of the portfolio's assets in North America, geographic diversification is minimal. This concentration increases exposure to regional risks, such as economic downturns or political instability in the U.S. Expanding geographic exposure to include developed and emerging markets can enhance diversification and reduce region-specific risks. Compare this allocation to global benchmarks, which typically have a more balanced geographic distribution, to identify opportunities for improved diversification and potential growth in international markets.

Market capitalization Info

  • Mega-cap
    48%
  • Large-cap
    36%
  • Mid-cap
    16%

The portfolio has a strong emphasis on mega and large-cap stocks, comprising 84% of the allocation. This focus on larger companies can provide stability and lower volatility but may limit exposure to the growth potential of smaller companies. Including mid-cap or small-cap stocks can enhance diversification and offer opportunities for higher returns. Compare this allocation to a benchmark that includes a mix of market capitalizations to assess potential improvements in diversification and growth potential.

Redundant positions Info

  • Vanguard Total World Stock Index Fund ETF Shares
    Vanguard S&P 500 ETF
    High correlation

The portfolio includes highly correlated assets, such as the Vanguard Total World Stock Index Fund ETF Shares and Vanguard S&P 500 ETF. High correlation means these assets tend to move in the same direction, which can limit diversification benefits. During market downturns, correlated assets may not provide the desired risk mitigation. Consider reducing overlap by adding assets with low correlation to the existing holdings. This strategy can enhance diversification and improve the portfolio's resilience to market fluctuations.

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.

Optimizing the portfolio using the Efficient Frontier could improve the risk-return ratio. The Efficient Frontier represents the best possible balance of risk and return given the current assets. By adjusting the allocation between existing holdings, you can potentially achieve higher returns for a given level of risk. However, optimization is limited to the current assets and doesn't address diversification gaps. Consider incorporating diverse assets to further enhance the portfolio's efficiency and resilience against market changes.

Dividends Info

  • Invesco NASDAQ 100 ETF 0.60%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total World Stock Index Fund ETF Shares 1.90%
  • Walgreens Boots Alliance Inc 8.50%
  • Weighted yield (per year) 1.10%

The portfolio's overall dividend yield is 1.10%, with Walgreens Boots Alliance Inc offering a substantial yield of 8.50%. While dividends can provide a steady income stream, the focus on growth-oriented ETFs means yields are generally lower. For investors seeking income, consider increasing exposure to dividend-focused funds or stocks with a history of stable payouts. Balancing growth and income can help achieve a more comprehensive investment strategy, aligning with both short-term income needs and long-term growth objectives.

Ongoing product costs Info

  • Invesco NASDAQ 100 ETF 0.15%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total World Stock Index Fund ETF Shares 0.07%
  • Weighted costs total (per year) 0.07%

The portfolio's total expense ratio (TER) is impressively low at 0.07%, which supports better long-term performance by minimizing costs. Lower fees mean more of your investment returns stay in your pocket, compounding over time. This cost efficiency is a strength of the portfolio and aligns well with best practices for cost management. Continue to monitor and compare expense ratios to ensure cost-effectiveness, especially if considering new investments or changes to the portfolio's composition.

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