A growth-focused portfolio with high tech exposure and limited geographic diversification

Report created on Feb 11, 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 concentrated in U.S. equities, with a significant 55% allocation to the Vanguard S&P 500 ETF. The remaining investments are spread across four other ETFs, focusing on large-cap growth, small-cap value, and technology sectors. Compared to a typical benchmark, this portfolio leans heavily towards large-cap stocks, resulting in a lower diversification score. While such concentration can enhance growth potential, it also increases vulnerability to market volatility. Consider diversifying into other asset classes or regions to balance risk and potential returns.

Growth Info

Historically, this portfolio has demonstrated strong performance with a Compound Annual Growth Rate (CAGR) of 19.27%. However, it has experienced a maximum drawdown of -33.93%, indicating vulnerability during market downturns. Compared to benchmarks, the high concentration in large-cap growth and technology sectors has contributed to heightened volatility and impressive returns. While past performance is not indicative of future results, maintaining a diversified approach could help mitigate potential losses during future market corrections.

Projection Info

The Monte Carlo simulation, which uses historical data to project future portfolio outcomes, indicates a wide range of potential returns. With a 50th percentile projection of 1,264.1%, the expected growth is promising. However, the 5th percentile at 173.7% highlights the risk of lower-than-expected returns. While simulations provide insight into potential outcomes, they rely on historical data and assumptions, which may not always reflect future conditions. Consider adjusting asset allocations to improve resilience against market fluctuations.

Asset classes Info

  • Stocks
    100%

The portfolio is entirely composed of stocks, lacking exposure to other asset classes like bonds or real estate. This singular focus on equities can lead to higher returns during bull markets but also increases risk during downturns. Diversification across different asset classes can provide stability and reduce overall portfolio risk. Aligning asset class weights with benchmark norms could enhance long-term performance by balancing growth with risk management.

Sectors Info

  • Technology
    41%
  • Financials
    11%
  • Consumer Discretionary
    11%
  • Telecommunications
    9%
  • Health Care
    8%
  • Industrials
    7%
  • Consumer Staples
    4%
  • Energy
    4%
  • Basic Materials
    2%
  • Utilities
    2%
  • Real Estate
    1%

With 41% of the portfolio in technology, there's a significant sector concentration that could lead to increased volatility. While the tech sector has driven substantial growth, it can be sensitive to interest rate changes and economic shifts. Compared to common benchmarks, this portfolio is heavily skewed towards tech, limiting exposure to other sectors. To mitigate risks, consider rebalancing towards a more diversified sector allocation, potentially including defensive sectors like healthcare or consumer staples.

Regions Info

  • North America
    99%
  • Europe Developed
    1%

The portfolio's geographic allocation is overwhelmingly focused on North America, with 99% exposure. This lack of international diversification can increase vulnerability to regional economic downturns. Compared to global benchmarks, this allocation is underexposed to developed and emerging markets outside the U.S. Expanding geographic exposure can enhance diversification and reduce risk by capturing growth opportunities in different regions.

Market capitalization Info

  • Mega-cap
    46%
  • Large-cap
    28%
  • Mid-cap
    14%
  • Small-cap
    6%
  • Micro-cap
    5%

The portfolio is heavily weighted towards mega-cap stocks, comprising 46% of the allocation. While these companies offer stability and liquidity, over-reliance on large caps can limit growth potential found in smaller companies. Compared to benchmarks, this portfolio's market cap distribution skews towards larger companies. Incorporating more mid and small-cap stocks can increase diversification and potentially enhance returns through exposure to different growth dynamics.

Redundant positions Info

  • Invesco QQQ Trust
    Vanguard Information Technology Index Fund ETF Shares
    Schwab U.S. Large-Cap Growth ETF
    High correlation

The portfolio contains highly correlated assets, particularly among the Invesco QQQ Trust, Vanguard Information Technology Index Fund ETF Shares, and Schwab U.S. Large-Cap Growth ETF. High correlation means these assets tend to move together, reducing diversification benefits. During market downturns, this can lead to amplified losses. Consider diversifying with assets that have lower correlation to each other, which can help manage risk and improve the portfolio's overall stability.

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's current allocation may not be optimized on the Efficient Frontier, which represents the best possible risk-return ratio. By adjusting the allocation among existing assets, potential returns could be maximized for a given level of risk. While optimization can enhance efficiency, it is essential to consider diversification and other goals. Balancing risk and return through strategic reallocation can lead to a more robust portfolio.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.60%
  • Invesco QQQ Trust 0.50%
  • 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) 0.99%

The portfolio's dividend yield is relatively low at 0.99%, reflecting its growth-oriented focus. While dividends can provide steady income, this portfolio prioritizes capital appreciation over income generation. For investors seeking income, increasing allocation to higher-yielding assets could enhance returns. However, for growth-focused investors, maintaining a lower dividend yield may be appropriate, as it aligns with the goal of maximizing capital growth.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Invesco QQQ Trust 0.20%
  • 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) 0.08%

The portfolio's Total Expense Ratio (TER) is impressively low at 0.08%, supporting better long-term performance by minimizing costs. With the largest allocation in the Vanguard S&P 500 ETF, which has a TER of just 0.03%, cost efficiency is a strong point. Keeping expenses low is crucial for maximizing net returns. This alignment with cost-effective investment practices is commendable and should be maintained to ensure continued portfolio efficiency.

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