Moderately Diversified Growth Portfolio with High Risk and Strong Technology Focus for US-Based Investors
Report created on Nov 28, 2024Risk profile
5/7
Diversification profile
3/5
Positions
-
VO Vanguard S&P 500 ETF
VOO - US9229083632 60.27% -
SM VanEck Semiconductor ETF
SMH - US92189F6768 36.53% -
AV Avantis® U.S. Small Cap Value ETF
AVUV - US0250728773 3.20%
The portfolio is composed of three ETFs, with a heavy concentration in the Vanguard S&P 500 ETF at 60.27%, followed by the VanEck Semiconductor ETF at 36.53%, and a small allocation to the Avantis U.S. Small Cap Value ETF at 3.2%. This allocation indicates a focus on large-cap U.S. stocks with a particular emphasis on the technology sector. The portfolio is moderately diversified, leaning heavily towards growth with a risk score of 5 out of 7, suggesting a higher risk tolerance. The diversification score of 3 out of 5 shows room for improvement in spreading out investments.
Growth
Historically, the portfolio has performed exceptionally well, with a compound annual growth rate (CAGR) of 24.01%. This impressive growth is partly due to the strong performance of the technology sector over recent years. However, the portfolio also experienced a maximum drawdown of -34.38%, indicating significant volatility. This highlights the importance of understanding the potential for both high returns and substantial losses. The portfolio's returns are concentrated in a few days, with 90% of returns occurring in just 23 days, emphasizing the impact of market timing.
Projection
A Monte Carlo simulation, assuming a hypothetical initial investment, was conducted with 1,000 simulations to project future performance. The results suggest a wide range of potential outcomes, with the 5th percentile predicting a 183.66% return and the 67th percentile predicting a 2,994.6% return. The median outcome is a 1,646.61% return, reflecting the portfolio's growth potential. The annualized return across all simulations is 27.77%, with 993 simulations showing positive returns. This analysis underscores the portfolio's potential for high growth, though it also highlights the inherent uncertainty and risk.
Asset classes
- Stocks 100%
The portfolio is heavily weighted towards stocks, with 99.93% of the assets in equities and a negligible 0.07% in cash. This allocation reflects an aggressive investment strategy aimed at maximizing growth through equity exposure. While this approach can lead to substantial returns, it also increases vulnerability to market volatility. Investors seeking to reduce risk may consider diversifying into other asset classes, such as bonds or real assets, to mitigate potential losses during market downturns. Balancing the asset classes could provide more stability and resilience to the portfolio.
Sectors
- Technology 57%
- Financials 9%
- Health Care 7%
- Consumer Discretionary 7%
- Telecommunications 6%
- Industrials 5%
- Consumer Staples 4%
- Energy 2%
- Utilities 2%
- Real Estate 1%
- Basic Materials 1%
The sector allocation is heavily skewed towards technology, which makes up 56.64% of the portfolio. This concentration can lead to significant gains during periods of tech sector growth but also exposes the portfolio to sector-specific risks. Other sectors, like financial services, healthcare, and consumer cyclicals, have more modest allocations, providing some diversification. Investors might benefit from reassessing their sector allocation to ensure a balanced exposure across different industries. This could help mitigate risks associated with sector-specific downturns and provide a more stable long-term growth trajectory.
Regions
- North America 92%
- Asia Developed 5%
- Europe Developed 3%
The portfolio's geographic allocation is predominantly focused on North America, which accounts for 92.41% of the investments. This heavy concentration on the U.S. market reflects a home bias and exposes the portfolio to risks associated with regional economic downturns. While the portfolio includes small allocations to developed Asia, Europe, and Latin America, these are minimal and do not significantly diversify geographic risk. Investors could consider increasing exposure to international markets to benefit from global growth opportunities and reduce reliance on the U.S. economy.
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 optimization chart suggests that there is room for improvement in terms of risk-adjusted returns. Investors can explore moving along the efficient frontier to achieve a more optimal balance between risk and return. For those looking to reduce risk, increasing the allocation to more conservative assets could help create a more stable portfolio. Conversely, investors seeking higher returns might consider adding riskier assets. However, it's crucial to ensure that any changes align with the investor's overall risk tolerance and financial goals, maintaining a well-diversified approach.
Dividends
- Avantis® U.S. Small Cap Value ETF 1.50%
- VanEck Semiconductor ETF 0.40%
- Vanguard S&P 500 ETF 1.20%
- Weighted yield (per year) 0.92%
The portfolio's dividend yield is relatively low at 0.92%, reflecting its growth-oriented focus. The Vanguard S&P 500 ETF contributes a yield of 1.2%, while the VanEck Semiconductor ETF and Avantis U.S. Small Cap Value ETF offer 0.4% and 1.5%, respectively. While dividends provide a steady income stream, the portfolio's primary goal is capital appreciation. Investors seeking higher income might consider reallocating a portion of their investments into dividend-focused assets. Balancing growth and income can help achieve a more stable and diversified portfolio.
Ongoing product costs
- Avantis® U.S. Small Cap Value ETF 0.25%
- VanEck Semiconductor ETF 0.35%
- Vanguard S&P 500 ETF 0.03%
- Weighted costs total (per year) 0.15%
The overall cost of the portfolio is low, with a total expense ratio (TER) of 0.15%. The Vanguard S&P 500 ETF, with an expense ratio of 0.03%, significantly contributes to this cost efficiency. The VanEck Semiconductor ETF and Avantis U.S. Small Cap Value ETF have higher expense ratios of 0.35% and 0.25%, respectively. Keeping costs low is crucial for maximizing returns over the long term. Investors should continue to monitor expense ratios and consider cost-effective investment options to ensure that fees do not erode potential gains.
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