A tech-focused growth portfolio with low geographic diversity and moderate risk profile

Report created on Dec 28, 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 evenly split between two ETFs: Invesco NASDAQ 100 ETF and Vanguard Total Stock Market Index Fund ETF. This composition shows a strong focus on U.S. equities, particularly within the technology sector. Compared to a typical balanced portfolio, this allocation lacks diversity, with minimal exposure to bonds or international markets. A more diversified approach could include varying asset classes like bonds or international equities to balance risk and potential returns. By broadening the asset base, you can potentially reduce volatility and improve stability over time.

Growth Info

Historically, the portfolio has performed well, with a Compound Annual Growth Rate (CAGR) of 15.79%. This is indicative of strong growth, likely driven by the tech-heavy NASDAQ ETF. However, it also experienced a maximum drawdown of -30.14%, suggesting significant volatility. Comparing to broader market indices, such as the S&P 500, this performance is commendable but underscores the inherent risk of a concentrated tech investment. It's important to remember that past performance doesn't guarantee future results, so maintaining a diversified portfolio can mitigate potential downturns.

Projection Info

The Monte Carlo simulation projects potential future outcomes based on historical data, with 1,000 simulations showing an annualized return of 16.98%. The median outcome suggests a strong growth potential, but the range between the 5th and 67th percentiles highlights possible volatility. While this analysis offers insight into potential returns, it's crucial to understand that it relies on historical trends and assumptions. The future market environment may differ, so diversifying your portfolio can help manage unexpected risks and improve the likelihood of achieving your financial goals.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily weighted in stocks, with 99.88% allocated to equities and a negligible amount in cash. This high equity exposure aligns with a growth-oriented strategy but limits diversification across asset classes. Typically, diversified portfolios include bonds or other fixed-income assets to reduce risk. By incorporating different asset classes, you can create a more balanced portfolio that might better withstand market fluctuations, providing a smoother investment journey while still targeting growth.

Sectors Info

  • Technology
    41%
  • Consumer Discretionary
    13%
  • Telecommunications
    12%
  • Health Care
    8%
  • Financials
    7%
  • Industrials
    6%
  • Consumer Staples
    5%
  • Energy
    2%
  • Utilities
    2%
  • Basic Materials
    2%
  • Real Estate
    2%

The portfolio is predominantly invested in the technology sector, accounting for over 40% of the allocation. Other sectors like consumer cyclicals and communication services also have significant weight. This sector concentration can lead to higher volatility, especially during market shifts affecting tech companies. Diversifying across more sectors could reduce risk and enhance stability. For example, increasing exposure to traditionally stable sectors like utilities or healthcare may provide a buffer against tech sector downturns, leading to a more resilient portfolio.

Regions Info

  • North America
    99%
  • Europe Developed
    1%

Geographically, the portfolio is overwhelmingly concentrated in North America, with 98.62% exposure. This limited geographic diversity could expose the portfolio to regional economic risks. Expanding exposure to international markets, such as Europe or Asia, can enhance diversification and potentially capture growth opportunities in different economies. By broadening geographic allocations, you can mitigate risks associated with local market downturns and benefit from the growth potential in other regions.

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 benefit from optimization using the Efficient Frontier, a concept that helps identify the best risk-return balance. This involves adjusting asset allocations to achieve the highest possible return for a given level of risk. While the current portfolio is growth-focused, exploring different combinations of asset weights could reveal more efficient allocations. By optimizing within the current asset mix, you can potentially enhance returns without significantly increasing risk, leading to a more robust investment strategy.

Dividends Info

  • Invesco NASDAQ 100 ETF 0.60%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.20%
  • Weighted yield (per year) 0.90%

The portfolio's dividend yield is relatively modest at 0.9%, reflecting its growth focus. Dividend income can be a valuable source of returns, especially during market downturns when price appreciation is limited. While growth stocks typically offer lower dividends, balancing them with higher-yielding assets might provide a steady income stream. Consider integrating dividend-focused investments to enhance cash flow and provide a cushion against volatility, supporting overall portfolio stability.

Ongoing product costs Info

  • Invesco NASDAQ 100 ETF 0.15%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Weighted costs total (per year) 0.09%

The total expense ratio (TER) of the portfolio is low at 0.09%, which is beneficial for long-term returns. Low costs mean more of your money is working for you, compounding over time. This cost efficiency aligns well with best practices in portfolio management. However, it's essential to regularly review fees to ensure they remain competitive. Maintaining low costs while achieving your investment objectives is crucial for maximizing returns and building wealth over time.

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