High-growth portfolio with tech concentration and low geographic diversification

Report created on Jan 4, 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 equities, with a strong emphasis on ETFs and individual stocks. Notably, the Vanguard S&P 500 ETF and Invesco NASDAQ 100 ETF make up a significant portion, along with major tech stocks like NVIDIA. This composition suggests a focus on capital appreciation through exposure to large-cap U.S. equities. Compared to standard benchmarks, this portfolio is less diversified, with a high concentration in specific stocks and sectors. To enhance diversification, consider incorporating more varied asset classes and sectors, which can help mitigate risk and improve stability.

Growth Info

Historically, the portfolio has achieved an impressive Compound Annual Growth Rate (CAGR) of 33.41%, indicating strong past performance. However, the maximum drawdown of -45.17% reflects significant volatility, which could concern risk-averse investors. These figures suggest that while the portfolio has potential for high returns, it also carries substantial risk. Comparing this to a broad market index, the portfolio's performance is more volatile, emphasizing the need for careful risk management. To balance risk and return, consider integrating more stable, income-generating assets.

Projection Info

Forward projections using Monte Carlo simulations show a wide range of potential outcomes, with a median return of 300.85%. The simulations, which use historical data to predict future performance, highlight both the potential for significant gains and the risk of losses. The 5th percentile shows a severe downside, indicating that there is a small chance of substantial loss. These projections underscore the importance of diversifying the portfolio to cushion against adverse market conditions. Remember, past performance and simulations can't guarantee future results, so maintaining a balanced approach is key.

Asset classes Info

  • Stocks
    100%

The portfolio is overwhelmingly concentrated in stocks, accounting for nearly 100% of the allocation, with minimal cash holdings. This heavy equity focus suggests a growth-oriented strategy but lacks diversification across asset classes. Compared to typical benchmarks, which often include bonds or other fixed-income assets, this portfolio may be more exposed to market volatility. Introducing bonds or alternative investments could provide diversification benefits and reduce overall risk, creating a more balanced portfolio that can better withstand market fluctuations.

Sectors Info

  • Technology
    37%
  • Consumer Discretionary
    18%
  • Consumer Staples
    15%
  • Industrials
    12%
  • Telecommunications
    5%
  • Financials
    4%
  • Health Care
    4%
  • Energy
    2%
  • Utilities
    1%
  • Basic Materials
    1%
  • Real Estate
    1%

The portfolio's sector allocation is heavily skewed towards technology, comprising over 37% of the total. Other sectors like consumer cyclicals and consumer defensive also hold significant shares. This concentration in tech, while potentially lucrative during growth periods, may increase volatility, especially during economic downturns or interest rate hikes. Compared to broader indices, this sector concentration suggests a higher risk profile. To mitigate sector-specific risks, consider diversifying into underrepresented sectors such as energy or utilities, which may offer more stability and counterbalance tech volatility.

Regions Info

  • North America
    99%

Geographically, the portfolio is predominantly invested in North America, with minimal exposure to other regions. This lack of geographic diversification can limit potential growth opportunities and increase vulnerability to regional economic downturns. Compared to global benchmarks, this portfolio is less diversified across regions. Expanding geographic exposure, particularly to emerging markets, could enhance diversification and provide access to different economic cycles and growth prospects, ultimately reducing regional risk and potentially improving long-term returns.

Redundant positions Info

  • Invesco NASDAQ 100 ETF
    Vanguard Total Stock Market Index Fund ETF Shares
    Vanguard S&P 500 ETF
    High correlation

The portfolio contains highly correlated assets, particularly among ETFs like the Vanguard S&P 500, Invesco NASDAQ 100, and Vanguard Total Stock Market Index Fund. High correlation means these assets tend to move together, limiting diversification benefits and potentially increasing risk during market downturns. By reducing overlap and including less correlated assets, such as international stocks or bonds, the portfolio could achieve better risk management. This adjustment could enhance the portfolio's resilience to market fluctuations and improve overall performance.

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 seeks the best possible risk-return ratio. Currently, the high concentration in correlated assets limits diversification benefits. By reallocating within the existing asset mix, particularly by reducing overlap, the portfolio can achieve a more efficient risk-return balance. This optimization focuses on maximizing returns for a given level of risk, not necessarily diversification. It's a valuable strategy for enhancing performance while maintaining the current asset base, but ensure alignment with your investment goals.

Dividends Info

  • Costco Wholesale Corp 0.50%
  • Home Depot Inc 2.30%
  • Invesco NASDAQ 100 ETF 0.60%
  • Schwab U.S. Dividend Equity ETF 3.60%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Walmart Inc 0.70%
  • Weighted yield (per year) 0.87%

The portfolio's dividend yield is relatively modest at 0.87%, with contributions from holdings like Schwab U.S. Dividend Equity ETF and Home Depot. Dividends can provide a steady income stream and may help offset market volatility. However, given the portfolio's growth focus, the current yield might not be a primary concern. For those seeking more income, consider increasing allocations to higher-yielding stocks or funds. Balancing growth and income can offer a smoother return profile and potentially enhance overall portfolio stability.

Ongoing product costs Info

  • Invesco NASDAQ 100 ETF 0.15%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Weighted costs total (per year) 0.04%

The portfolio's total expense ratio (TER) is impressively low at 0.04%, thanks to cost-effective ETFs like Vanguard S&P 500 and Schwab U.S. Dividend Equity. Low costs can significantly enhance long-term returns by minimizing the drag on performance. Compared to industry averages, this cost structure is highly efficient, supporting better net returns over time. Maintaining this low-cost approach is advantageous, but it’s also worth reviewing periodically to ensure that any new additions to the portfolio remain cost-effective and align with the overall investment strategy.

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