High growth-focused portfolio with strong tech exposure and limited geographic diversification

Report created on Jan 2, 2025

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 weighted towards equities, with 99.9% in stocks and minimal cash holdings. The Vanguard S&P 500 ETF forms the core at 60%, complemented by large-cap growth and tech-focused ETFs and individual stocks. This composition aligns with a growth-focused strategy, emphasizing capital appreciation. However, it lacks diversification, being concentrated in similar asset types. A more balanced portfolio might include bonds or alternative investments to reduce volatility and enhance stability. Diversifying asset classes could help mitigate risk, especially during market downturns when equities may underperform.

Growth Info

Historically, the portfolio has performed well, achieving a compound annual growth rate (CAGR) of 20.02%. This indicates strong past returns, likely driven by the tech-heavy allocation. However, the maximum drawdown of -48.86% highlights significant volatility. This level of drawdown is typical for growth-focused portfolios but can be unsettling during market corrections. It's important to note that past performance doesn't guarantee future results. To manage potential downturns, consider incorporating more stable, income-generating assets, which may provide a cushion against severe market dips.

Projection Info

Monte Carlo simulations project potential outcomes based on historical data, offering insights into future performance. With an annualized return of 34.3% across simulations, the portfolio shows strong growth potential. However, the 5th percentile indicates a lower bound of 368.25%, emphasizing the risk of lower returns. Simulations suggest most outcomes are positive, but they rely on historical trends that may not persist. It's crucial to remain cautious and regularly reassess the portfolio to adapt to changing market conditions. Consider stress-testing under different scenarios to better understand potential risks.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily concentrated in equities, with a negligible cash position. This single asset class focus limits diversification and exposes the portfolio to equity market risks. While stocks offer high growth potential, they can also be volatile. Diversification across asset classes, such as adding fixed income or real assets, can provide stability and reduce overall risk. A more balanced approach could help cushion against market fluctuations and provide a more consistent return stream over time. Rebalancing periodically to maintain target allocations is advisable.

Sectors Info

  • Technology
    40%
  • Telecommunications
    17%
  • Consumer Discretionary
    12%
  • Financials
    8%
  • Health Care
    8%
  • Industrials
    5%
  • Consumer Staples
    4%
  • Energy
    2%
  • Utilities
    2%
  • Real Estate
    1%
  • Basic Materials
    1%

The portfolio is predominantly invested in technology, which comprises 39.5% of the allocation. This sector focus aligns with the growth strategy, as tech has been a major driver of market gains. However, it also introduces sector-specific risks, such as regulatory changes or tech market corrections. Other sectors like communication services and consumer cyclicals are also represented but to a lesser extent. To mitigate sector risk, consider diversifying into less represented sectors such as healthcare or industrials, which may offer different growth dynamics and reduce overall portfolio volatility.

Regions Info

  • North America
    100%

The portfolio's geographic exposure is overwhelmingly concentrated in North America at 99.5%, with minimal allocations to other regions. This lack of geographic diversification could limit growth opportunities and increase vulnerability to regional economic downturns. Expanding exposure to international markets, particularly in emerging economies, could enhance diversification and tap into different growth drivers. Global diversification also helps mitigate currency risk and provides a hedge against domestic market volatility. Exploring international ETFs or funds could be a practical step towards achieving a more balanced geographic allocation.

Redundant positions Info

  • Vanguard Information Technology Index Fund ETF Shares
    Schwab U.S. Large-Cap Growth ETF
    Vanguard S&P 500 ETF
    High correlation

The portfolio's assets are highly correlated, particularly among the ETFs, indicating that they tend to move together. This high correlation limits diversification benefits and increases exposure to market-wide risks. During downturns, correlated assets may decline simultaneously, amplifying losses. Reducing overlap by selecting assets with lower correlation can enhance diversification and improve risk management. Consider incorporating assets with different performance drivers, such as bonds or real estate, to achieve a more balanced risk-return profile. Regularly reviewing asset correlations can help maintain effective diversification.

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, which aims to achieve the best possible risk-return ratio. This involves adjusting the weights of current assets to maximize returns for a given level of risk. However, before optimizing, it's crucial to address the high correlation among assets, as overlapping holdings limit diversification benefits. Once diversification is improved, rebalancing towards the Efficient Frontier can enhance portfolio efficiency. This approach focuses on optimizing the risk-return trade-off, rather than diversification or other specific goals.

Dividends Info

  • Alphabet Inc Class A 0.30%
  • Meta Platforms Inc. 0.30%
  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • Vanguard Information Technology Index Fund ETF Shares 0.60%
  • Vanguard S&P 500 ETF 1.20%
  • Weighted yield (per year) 0.85%

The portfolio’s dividend yield is relatively low at 0.85%, reflecting its growth-oriented strategy. While dividends can provide steady income, this portfolio prioritizes capital gains over income generation. For investors seeking income, higher-yielding assets or dividend-focused funds could be considered. However, given the growth focus, reinvesting dividends to compound returns might align better with long-term objectives. Balancing growth and income through a mix of high-yield and growth assets can offer a more comprehensive return strategy, catering to both capital appreciation and income needs.

Ongoing product costs Info

  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • Vanguard Information Technology Index Fund ETF Shares 0.10%
  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.03%

The portfolio's costs are impressively low, with a total expense ratio (TER) of 0.03%. This cost efficiency supports better long-term performance by minimizing the drag on returns. Low-cost ETFs like those in the portfolio are an effective way to gain market exposure without high fees. Keeping costs in check is crucial, especially for long-term investors, as it can significantly enhance net returns over time. Continuously monitoring and comparing fund fees ensures that the portfolio remains cost-effective and aligned with financial goals.

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