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

Report created on Jan 10, 2025

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 U.S. large-cap growth and tech-focused ETFs, with 70% allocation in the technology sector. Such a concentrated allocation can lead to significant volatility compared to more diversified portfolios. Typically, a balanced portfolio includes a mix of asset classes like stocks, bonds, and cash to mitigate risk. To reduce potential volatility, consider diversifying into other sectors or asset classes that provide stability during market fluctuations.

Growth Info

Historically, the portfolio has delivered a strong Compound Annual Growth Rate (CAGR) of 18.97%, indicating robust past performance. However, it also experienced a maximum drawdown of 36.92%, highlighting its vulnerability during downturns. While historical performance can offer insight, it doesn't guarantee future results. To potentially smooth out returns, incorporating assets with lower volatility or different market cycles might be beneficial.

Projection Info

Using Monte Carlo simulations, which apply historical data to predict future outcomes, the portfolio shows potential for high returns, with a median projection of 984.34%. However, the high risk is evident, with a significant range between the 5th and 67th percentiles. While these projections offer a glimpse into possible outcomes, they rely on past data and assumptions. To better manage risk, consider adjusting the portfolio to include a wider range of asset types.

Asset classes Info

  • Stocks
    100%

The portfolio is overwhelmingly concentrated in stocks, with nearly 100% allocation, leaving little room for diversification through other asset classes. This lack of diversification can amplify risk, especially during stock market downturns. Typically, a diversified portfolio includes bonds or other assets to cushion against stock volatility. Consider incorporating different asset classes to achieve a more balanced risk-return profile.

Sectors Info

  • Technology
    70%
  • Telecommunications
    11%
  • Consumer Discretionary
    7%
  • Health Care
    4%
  • Financials
    2%
  • Industrials
    2%
  • Consumer Staples
    2%
  • Basic Materials
    1%

With 70% of the portfolio in technology, there's significant sector concentration, which can lead to higher volatility. While tech has driven growth, it can also be sensitive to interest rate changes and market sentiment. A more balanced sector allocation can mitigate these risks. Consider adding exposure to underrepresented sectors like healthcare or consumer staples to enhance stability and reduce sector-specific risks.

Regions Info

  • North America
    97%
  • Asia Developed
    1%
  • Europe Developed
    1%

The portfolio's geographic exposure is heavily skewed towards North America, accounting for over 97% of the allocation. This limited geographic diversification can increase vulnerability to regional economic downturns. A more globally diversified portfolio typically includes significant exposure to Europe, Asia, and emerging markets. Expanding geographic exposure could enhance diversification and potentially improve risk-adjusted returns.

Redundant positions Info

  • Fidelity® MSCI Information Technology Index ETF
    iShares Expanded Tech Sector ETF
    Invesco NASDAQ 100 ETF
    Schwab U.S. Large-Cap Growth ETF
    High correlation

The portfolio's assets are highly correlated, particularly within the tech ETFs, which means they tend to move in tandem. This can limit diversification benefits during market downturns, as all assets may decline simultaneously. Reducing correlation by introducing less correlated assets, such as those in different sectors or regions, can help manage risk and improve the portfolio's 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.

The portfolio could be optimized by reducing overlap in highly correlated assets, which may not add diversification benefits. The Efficient Frontier concept suggests that reallocating within current assets can improve the risk-return ratio. Consider reallocating to reduce concentration in similar tech ETFs, potentially enhancing overall efficiency and aligning with growth goals.

Dividends Info

  • Fidelity® MSCI Information Technology Index ETF 0.40%
  • iShares Expanded Tech Sector ETF 0.20%
  • Invesco NASDAQ 100 ETF 0.60%
  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • VanEck Semiconductor ETF 0.40%
  • Weighted yield (per year) 0.40%

The portfolio's dividend yield is relatively low at 0.4%, reflecting its growth-focused nature. While growth investments often prioritize capital appreciation over income, dividends can provide a steady return component. For investors seeking income, balancing growth with dividend-paying stocks or funds might be beneficial. Consider adding higher-yielding assets to increase income potential without sacrificing growth.

Ongoing product costs Info

  • Fidelity® MSCI Information Technology Index ETF 0.08%
  • iShares Expanded Tech Sector ETF 0.41%
  • Invesco NASDAQ 100 ETF 0.15%
  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • VanEck Semiconductor ETF 0.35%
  • Weighted costs total (per year) 0.18%

The portfolio's total expense ratio (TER) is 0.18%, which is quite competitive. Lower costs are beneficial as they enhance net returns over time. Keeping fees low is important for long-term performance, as high fees can erode returns. Continue to monitor and manage costs, potentially exploring lower-cost alternatives if they align with your investment strategy.

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