A growth-focused portfolio with high tech exposure and low geographic diversification

Report created on Dec 8, 2024

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 concentrated in ETFs, with a significant 50% in the Invesco QQQ Trust, 25% in the SPDR® S&P 600 Small Cap Growth ETF, and 25% in the Vanguard Total Stock Market Index Fund ETF. This composition indicates a strong focus on growth-oriented stocks, particularly in technology and small-cap sectors. The reliance on a limited number of ETFs suggests a lack of diversification, which can increase risk during market downturns. To balance this, consider adding other asset classes, such as bonds or international equities, to reduce volatility and improve the risk-return profile.

Growth Info

Historically, the portfolio has shown impressive growth with a compound annual growth rate (CAGR) of 16.4%. However, it experienced a significant maximum drawdown of -31.9%, indicating vulnerability to market corrections. This performance reflects the high-risk, high-reward nature typical of growth-focused investments. While past performance can guide expectations, it's essential to remember that it doesn't guarantee future results. To mitigate potential losses, consider strategies like stop-loss orders or diversifying into less volatile assets to protect against sharp declines.

Projection Info

Monte Carlo simulations, which use historical data to project future outcomes, suggest a wide range of potential returns. The 50th percentile indicates a 562.43% potential return, while the 5th percentile shows an 84.07% return, highlighting the portfolio's volatility. Although 992 out of 1,000 simulations resulted in positive returns, it's crucial to remember that these projections are not predictions. They merely illustrate possible outcomes based on past trends. To prepare for uncertainty, consider setting clear investment goals and maintaining an emergency fund to manage potential fluctuations.

Asset classes Info

  • Stocks
    100%

The portfolio's allocation is overwhelmingly in stocks, with 99.86% exposure, leaving it vulnerable to equity market volatility. This lack of asset class diversification means the portfolio may not be well-protected against economic downturns or interest rate changes. Including bonds, real estate, or alternative investments could help reduce risk and provide more stable returns. Diversifying across different asset classes can also offer better protection against inflation and currency fluctuations, enhancing overall portfolio resilience.

Sectors Info

  • Technology
    37%
  • Consumer Discretionary
    13%
  • Telecommunications
    11%
  • Industrials
    9%
  • Health Care
    9%
  • Financials
    6%
  • Consumer Staples
    5%
  • Energy
    3%
  • Basic Materials
    3%
  • Real Estate
    2%
  • Utilities
    2%

With 36.72% of the portfolio in technology, there's a notable sector concentration, which can increase risk if the tech sector underperforms. Other sectors, like consumer cyclicals and communication services, also have significant allocations. While these sectors can drive growth, their cyclical nature may lead to volatility. To mitigate sector-specific risks, consider redistributing some investments into underrepresented sectors, such as utilities or consumer staples, which tend to be more stable and less sensitive to economic cycles.

Regions Info

  • North America
    98%
  • Europe Developed
    1%
  • Latin America
    1%

The portfolio is predominantly focused on North America, with 98.39% exposure, limiting its geographic diversification. This concentration means the portfolio may be overly sensitive to economic, political, or currency changes in the U.S. and Canada. Expanding geographic exposure by investing in emerging markets or developed economies outside North America could provide better diversification and access to growth opportunities in different regions. This approach can help reduce regional risks and enhance long-term returns.

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 potentially be optimized using the Efficient Frontier, which aims to achieve the best possible risk-return ratio. By adjusting the allocation among current assets, you might enhance returns without increasing risk. This doesn't necessarily mean adding new investments but rather fine-tuning existing ones. Consider rebalancing periodically to maintain the desired risk level and capitalize on market opportunities. Remember, optimization focuses on risk and return, not diversification or other investment goals.

Dividends Info

  • Invesco QQQ Trust 0.60%
  • SPDR® S&P 600 Small Cap Growth ETF 1.00%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.20%
  • Weighted yield (per year) 0.85%

The portfolio's overall dividend yield is 0.85%, with contributions from the Invesco QQQ Trust, SPDR® S&P 600 Small Cap Growth ETF, and Vanguard Total Stock Market Index Fund ETF. While this yield provides some income, it may not be sufficient for income-focused investors. To enhance income potential, consider incorporating higher-yielding assets, such as dividend-focused ETFs or individual dividend-paying stocks. This strategy can help balance growth and income, providing a more stable cash flow during market fluctuations.

Ongoing product costs Info

  • Invesco QQQ Trust 0.20%
  • SPDR® S&P 600 Small Cap Growth ETF 0.15%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Weighted costs total (per year) 0.14%

With a total expense ratio (TER) of 0.14%, the portfolio's costs are relatively low, which is beneficial for long-term returns. Lower costs mean more of your money is working for you, compounding over time. However, it's still worth exploring ways to reduce costs further, such as considering commission-free trading platforms or low-cost index funds. By minimizing expenses, you can improve net returns and enhance the portfolio's performance, especially over extended investment horizons.

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