High-growth portfolio with low diversification and strong focus on US equities

Report created on Dec 21, 2024

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

This portfolio is heavily weighted towards the Vanguard Total Stock Market Index Fund ETF, comprising over 89% of the allocation, with the remaining 10% in the Invesco QQQ Trust. Such a concentrated composition indicates a strong focus on US equities, limiting exposure to other asset classes. While this setup aligns with a growth-oriented strategy, it lacks diversification, which could increase risk during market downturns. To enhance stability, consider adding more diverse asset types, such as bonds or international equities, to balance the portfolio.

Growth Info

Historically, this portfolio has delivered an impressive compound annual growth rate (CAGR) of 14.04%. However, it also experienced a significant maximum drawdown of -34.01%, indicating vulnerability during market declines. This performance highlights the portfolio's potential for high returns but also underscores the risks associated with its concentrated nature. Comparing these metrics to broader market benchmarks can provide context for assessing performance. Consider strategies to mitigate drawdowns, such as diversification or tactical asset allocation.

Projection Info

Using Monte Carlo simulations, which analyze potential future outcomes based on historical data, this portfolio shows promising projections. With an average annualized return of 17.53% across simulations, it suggests strong growth potential. However, it's crucial to remember that these are estimates and not guarantees. The simulations indicate a wide range of possible outcomes, emphasizing the importance of understanding potential risks. Regularly reviewing and adjusting your portfolio can help align it with evolving market conditions and personal goals.

Asset classes Info

  • Stocks
    100%

The portfolio's asset allocation is almost entirely in stocks, with a negligible cash component. This heavy stock allocation suggests a high-risk, high-reward strategy typical for growth-focused investors. While this can maximize returns during bull markets, it may also lead to substantial losses in downturns. Diversifying into other asset classes, such as bonds or alternative investments, can reduce volatility and provide a buffer against market fluctuations. A more balanced approach may enhance long-term stability and risk-adjusted returns.

Sectors Info

  • Technology
    33%
  • Financials
    12%
  • Consumer Discretionary
    11%
  • Health Care
    11%
  • Telecommunications
    9%
  • Industrials
    8%
  • Consumer Staples
    5%
  • Energy
    3%
  • Real Estate
    3%
  • Utilities
    2%
  • Basic Materials
    2%

The sector allocation shows a notable concentration in technology, which makes up nearly 33% of the portfolio. While tech can drive growth, it also introduces sector-specific risks, especially during periods of regulatory changes or tech sector corrections. Other sectors like financial services and consumer cyclicals are also significant but less dominant. To mitigate sector-specific risks, consider rebalancing to achieve a more even distribution across various sectors, aligning with broader market indices.

Regions Info

  • North America
    99%

Geographically, the portfolio is overwhelmingly concentrated in North America, with over 99% exposure. This lack of geographic diversification could increase vulnerability to region-specific economic downturns or policy changes. Diversifying into international markets can provide exposure to different economic cycles and growth opportunities. Consider adding investments from Europe, Asia, or emerging markets to enhance geographic diversification, which can help manage risk and capture global growth potential.

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 this portfolio using the Efficient Frontier could enhance its risk-return profile. This involves adjusting the current asset allocation to achieve the best possible balance between risk and return. While the portfolio is already positioned for growth, further optimization may identify opportunities to improve efficiency without altering the overall strategy. Regular reviews and adjustments can ensure the portfolio remains aligned with your risk tolerance and investment objectives.

Dividends Info

  • Invesco QQQ Trust 0.40%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.90%
  • Weighted yield (per year) 0.85%

The portfolio's dividend yield is relatively low at 0.85%, reflecting its growth focus. While dividends can provide a steady income stream and add to total returns, this portfolio prioritizes capital appreciation over income generation. Investors seeking higher income may consider incorporating dividend-focused assets or funds. However, for those with a growth-oriented strategy, reinvesting dividends can enhance compounding and long-term wealth accumulation.

Ongoing product costs Info

  • Invesco QQQ Trust 0.20%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Weighted costs total (per year) 0.05%

With a total expense ratio (TER) of just 0.05%, the portfolio benefits from low costs, which supports better long-term performance by minimizing fees. Keeping expenses low is crucial for maximizing net returns, especially in a growth-focused portfolio. This cost-efficiency aligns well with best practices in portfolio management. Continue monitoring and comparing fund fees to ensure they remain competitive and consider cost-effective alternatives if necessary.

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