Well-balanced growth-focused portfolio with strong diversification and potential for high returns but significant exposure to tech sector

Report created on Nov 23, 2024

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

4/5
Broadly Diversified
Less diversification More diversification

Positions

The portfolio consists of five ETFs, with a notable 40% allocation to the Invesco QQQ Trust, which heavily focuses on tech stocks. The Vanguard Total Stock Market Index Fund and Vanguard Total International Stock Index Fund provide broad market exposure, accounting for 25% and 20%, respectively. The iShares Core Dividend Growth ETF adds a 10% allocation focused on dividend growth, while the SPDR Portfolio S&P 500 ETF rounds it out with 5%. This composition indicates a growth-oriented strategy with a solid diversification across asset classes and sectors.

Growth Info

Historically, this portfolio has performed well, with a CAGR of 14.23% and a maximum drawdown of -31.23%. This suggests strong growth potential but also highlights the risk of significant downturns. The concentration in tech stocks, particularly through the Invesco QQQ Trust, has driven much of this growth. However, the portfolio's volatility is evident in the days that account for 90% of returns, indicating that gains are concentrated in a few periods. Balancing growth with risk management is crucial for future performance.

Projection Info

Using a Monte Carlo simulation with 1,000 iterations, the portfolio's future performance shows promising potential. Assuming a hypothetical initial investment, the median outcome is a 428.57% return, with the 5th percentile at 66% and the 67th percentile at 594.35%. This simulation provides a range of possible outcomes, illustrating both the potential upside and the risks involved. The high number of simulations with positive returns (992 out of 1,000) indicates a strong likelihood of continued growth, but with variability in returns.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily weighted in stocks, with 99.55% allocated to equities, and minimal exposure to other asset classes like cash and others. This allocation reflects a high-risk, high-reward strategy typical of growth portfolios. Stocks offer significant growth potential, but they also come with higher volatility compared to bonds or other fixed-income investments. To balance risk, consider gradually introducing other asset classes, such as bonds, to provide more stability and reduce overall portfolio volatility.

Sectors Info

  • Technology
    34%
  • Consumer Discretionary
    12%
  • Telecommunications
    10%
  • Financials
    10%
  • Health Care
    9%
  • Industrials
    8%
  • Consumer Staples
    6%
  • Energy
    3%
  • Basic Materials
    3%
  • Utilities
    3%
  • Real Estate
    2%

Sector allocation is dominated by technology, which makes up 34.14% of the portfolio, followed by consumer cyclicals and communication services. This concentration in tech suggests a bet on continued innovation and growth in this sector. While this can lead to substantial returns, it also poses a risk if the tech sector underperforms. Diversifying further into less represented sectors like utilities and real estate could help mitigate sector-specific risks and provide more balanced growth across different economic conditions.

Regions Info

  • North America
    80%
  • Europe Developed
    8%
  • Asia Emerging
    3%
  • Japan
    3%
  • Asia Developed
    2%
  • Australasia
    1%
  • Africa/Middle East
    1%
  • Latin America
    1%

Geographically, the portfolio is heavily skewed towards North America, with 80.35% of assets allocated there. This reflects a home-country bias common among U.S. investors. While this can capitalize on familiar markets, it may limit exposure to growth opportunities in other regions. Increasing allocations to emerging markets or developed regions outside North America could enhance diversification and capture growth in different economic cycles. Such diversification can also help reduce the impact of localized economic downturns.

Redundant positions Info

  • Vanguard Total Stock Market Index Fund ETF Shares
    Invesco QQQ Trust
    iShares Core Dividend Growth ETF
    SPDR® Portfolio S&P 500 ETF
    High correlation

The portfolio exhibits high correlation among its assets, particularly between the Vanguard Total Stock Market Index Fund, Invesco QQQ Trust, iShares Core Dividend Growth ETF, and SPDR Portfolio S&P 500 ETF. This correlation indicates that these assets tend to move in the same direction, which can amplify both gains and losses. To reduce this risk, consider incorporating assets with lower correlations, which can provide a buffer against market volatility and enhance overall portfolio resilience.

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 isn't recommended due to the high correlation among assets, which limits diversification benefits. Instead, focus on rebalancing to align with risk tolerance and investment goals. Moving along the efficient frontier can adjust risk levels – increasing bond allocations for lower risk or adding more equities for higher returns. Addressing sector and geographic concentration can also enhance diversification. Prioritize these adjustments over optimization to better manage risk and improve potential returns.

Dividends Info

  • iShares Core Dividend Growth ETF 2.10%
  • Invesco QQQ Trust 0.60%
  • SPDR® Portfolio S&P 500 ETF 1.20%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Vanguard Total International Stock Index Fund ETF Shares 3.00%
  • Weighted yield (per year) 1.44%

The portfolio's dividend yield stands at 1.44%, with the Vanguard Total International Stock Index Fund ETF Shares contributing the highest yield at 3.0%. This yield provides a modest income stream, supplementing potential capital gains. While not the primary focus of a growth-oriented portfolio, dividends can offer some stability during market downturns. To increase income, consider adding more dividend-focused assets. However, balance this with the growth objectives to maintain the portfolio's overall strategy.

Ongoing product costs Info

  • iShares Core Dividend Growth ETF 0.08%
  • Invesco QQQ Trust 0.20%
  • SPDR® Portfolio S&P 500 ETF 0.02%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.11%

The portfolio's total expense ratio (TER) is 0.11%, which is relatively low, reflecting cost-effective management. Low fees are beneficial as they minimize the drag on returns, allowing more of the investment gains to be retained. Each ETF in the portfolio has low individual expense ratios, with the SPDR Portfolio S&P 500 ETF being the cheapest at 0.02%. Keeping costs low is a key component of long-term investment success, and this portfolio does well in that regard. Continue to monitor and manage costs to maintain this advantage.

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