A growth-focused portfolio with high tech concentration and limited international exposure

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, making up 95% of the composition, with a small allocation to individual stocks. This structure leans towards a growth-focused strategy, as evidenced by the significant investments in broad market and technology-focused ETFs. Compared to common benchmarks, this portfolio is less diversified, with a high concentration in specific sectors. For a more balanced approach, consider diversifying into other asset types like bonds or international equities to reduce risk and enhance stability.

Growth Info

Historically, the portfolio has delivered strong returns with a CAGR of 19.64%, indicating robust growth over time. However, it has also experienced a significant maximum drawdown of -31.88%, highlighting its susceptibility to market volatility. While past performance is impressive, it's important to remember that it doesn't guarantee future results. To mitigate potential downturns, consider incorporating more defensive assets or diversifying across sectors that historically perform well during economic downturns.

Projection Info

The Monte Carlo simulation projects a wide range of potential outcomes, with a median return of 1,326.91% and a high likelihood of positive returns. This method uses historical data to simulate future performance, though it's important to note that these are hypothetical scenarios. While the optimistic projections are encouraging, it's crucial to maintain a diversified portfolio to protect against unforeseen market events. Consider rebalancing periodically to align with changing market conditions and personal goals.

Asset classes Info

  • Stocks
    100%

The portfolio is nearly entirely composed of stocks, with a negligible cash allocation. This heavy stock concentration suggests a high-risk, high-reward strategy typical of growth-focused portfolios. While this can lead to significant gains, it also exposes the portfolio to greater volatility. To enhance diversification, consider incorporating other asset classes such as bonds or real estate, which can provide stability and reduce overall portfolio risk during market downturns.

Sectors Info

  • Technology
    43%
  • Consumer Discretionary
    10%
  • Telecommunications
    9%
  • Health Care
    9%
  • Financials
    9%
  • Industrials
    7%
  • Consumer Staples
    7%
  • Energy
    3%
  • Basic Materials
    1%
  • Utilities
    1%
  • Real Estate
    1%

With over 43% of the portfolio allocated to technology, there's a notable sector concentration that could lead to increased volatility, especially during interest rate hikes. Other sectors like consumer cyclicals and healthcare are underrepresented compared to typical benchmarks. To mitigate sector-specific risks, consider diversifying into sectors that may perform well in different economic environments. This approach can help balance the portfolio and reduce dependence on the tech sector's performance.

Regions Info

  • North America
    99%

The portfolio's geographic exposure is overwhelmingly focused on North America, with 99% allocation, limiting international diversification. This concentration can heighten vulnerability to regional economic downturns or policy changes. To achieve a more globally diversified portfolio, consider increasing exposure to emerging markets or developed regions outside North America. This can help capture growth opportunities worldwide and reduce the risk associated with relying solely on a single geographic area.

Redundant positions Info

  • Vanguard Information Technology Index Fund ETF Shares
    Schwab U.S. Large-Cap Growth ETF
    Invesco QQQ Trust
    High correlation

The portfolio contains several highly correlated assets, notably within the technology sector, reducing the diversification benefits. When assets move together, the risk of simultaneous losses increases during market downturns. To enhance diversification, consider replacing or reducing exposure to overlapping assets. Introducing non-correlated or less-correlated investments can help spread risk and improve the portfolio's overall resilience against market volatility.

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.

Portfolio optimization suggests potential improvements by reducing highly correlated assets, potentially increasing expected returns to 30.69%. This involves reallocating within the current asset pool to achieve a better risk-return ratio. The Efficient Frontier concept helps in finding this optimal balance. While optimization can enhance returns, it’s important to align any changes with your risk tolerance and investment goals. Consider consulting with a financial advisor to tailor the optimization process to your specific needs.

Dividends Info

  • Costco Wholesale Corp 0.50%
  • Northrop Grumman Corporation 1.80%
  • Invesco QQQ Trust 0.60%
  • Schwab U.S. Dividend Equity ETF 3.70%
  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • Vanguard Information Technology Index Fund ETF Shares 0.60%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Weighted yield (per year) 1.10%

The portfolio's dividend yield is relatively low at 1.1%, reflecting its growth-oriented nature. While dividends can provide a steady income stream, they are less critical for growth-focused investors who prioritize capital appreciation. However, incorporating higher dividend-yielding assets could enhance income without significantly sacrificing growth potential. Consider balancing growth and income to achieve a more well-rounded portfolio that can weather various market conditions.

Ongoing product costs Info

  • Invesco QQQ Trust 0.20%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • Vanguard Information Technology Index Fund ETF Shares 0.10%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Weighted costs total (per year) 0.07%

The portfolio's overall costs are impressively low, with a Total Expense Ratio (TER) of 0.07%, which is favorable for long-term performance. Lower costs mean more of your investment returns are retained, enhancing compounding benefits over time. Maintaining low costs is a positive aspect of this portfolio. However, continue to monitor expense ratios and consider switching to lower-cost alternatives if available, ensuring that cost efficiency remains a priority in your investment strategy.

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