A growth-focused portfolio with tech concentration and limited international diversification

Report created on Dec 31, 2024

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

1/5
Single-Focused
Less diversification More diversification

Positions

The portfolio is heavily weighted towards stocks, making up nearly 95% of the total allocation. With a significant portion in ETFs, notably the Vanguard S&P 500 ETF at nearly 27%, it emphasizes broad market exposure. Compared to a typical balanced portfolio, this one is more aggressive, focusing on equities over bonds or other asset classes. This structure is suitable for growth but may lack the stability that bonds or cash equivalents provide. Consider adding more varied asset classes to balance growth potential with risk management.

Growth Info

Historically, the portfolio has shown impressive growth with a Compound Annual Growth Rate (CAGR) of 19.16%. However, it experienced a maximum drawdown of -28.7%, indicating vulnerability during market downturns. This performance suggests a high-risk, high-reward profile. While past performance is promising, it's crucial to remember that it doesn't guarantee future results. To mitigate potential future losses, consider diversifying further or incorporating defensive assets that can stabilize returns during volatile periods.

Projection Info

Monte Carlo simulations, which use historical data to predict future outcomes, suggest a wide range of potential returns. The portfolio's 50th percentile projection is a 540.1% increase, but the 5th percentile shows a potential -45.28% loss, highlighting significant risk. With 897 out of 1,000 simulations yielding positive returns, the outlook is generally optimistic. However, simulations rely on past data and can't predict future market conditions precisely. To better manage risk, regularly reassess asset allocations and consider adjustments based on changing market trends.

Asset classes Info

  • Stocks
    95%
  • Real Estate
    3%
  • Cash
    2%

The portfolio's allocation is predominantly in stocks, with minimal exposure to bonds and real estate. This heavy stock allocation can lead to higher volatility, especially during market downturns. In contrast, typical benchmark portfolios include a more balanced mix of stocks and bonds for risk mitigation. To enhance diversification, consider increasing exposure to bonds or other asset classes like real estate or cash. This can provide a buffer against market fluctuations and contribute to more stable long-term returns.

Sectors Info

  • Technology
    29%
  • Telecommunications
    17%
  • Financials
    13%
  • Consumer Staples
    12%
  • Consumer Discretionary
    10%
  • Health Care
    7%
  • Energy
    4%
  • Real Estate
    4%
  • Industrials
    4%
  • Basic Materials
    1%
  • Utilities
    1%

The portfolio is notably concentrated in technology and communication services, comprising over 45% of the allocation. This sector concentration may lead to higher volatility, especially if tech industries face downturns. Compared to common benchmarks, this portfolio is less diversified across sectors. While tech-heavy portfolios can offer growth, they may be sensitive to interest rate hikes or regulatory changes. Consider diversifying into sectors like healthcare or consumer goods to balance potential risks and capture growth opportunities in different market conditions.

Regions Info

  • North America
    96%
  • Europe Developed
    2%
  • Japan
    1%
  • Asia Emerging
    1%

Geographic exposure is heavily skewed towards North America, with over 96% of the portfolio allocated there. This concentration limits international diversification, which can buffer against regional economic downturns. Compared to global benchmarks, this portfolio lacks exposure to emerging markets and developed economies outside North America. To improve diversification and potentially enhance returns, consider increasing allocations to international markets. This can provide access to growth opportunities in regions with different economic cycles and market dynamics.

Redundant positions Info

  • Vanguard S&P 500 ETF
    Direxion Daily S&P500® Bull 3X Shares
    High correlation

The portfolio includes highly correlated assets, such as the Vanguard S&P 500 ETF and Direxion Daily S&P500® Bull 3X Shares. High correlation means these assets tend to move together, which can limit diversification benefits. In market downturns, correlated assets may not provide the risk mitigation that more diverse holdings could offer. To enhance diversification, consider replacing some correlated assets with those that have different performance drivers. This can help manage risk and potentially improve the portfolio's overall 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 is currently not optimized on the Efficient Frontier, which represents the best possible risk-return ratio. By adjusting asset allocations, an optimized portfolio could achieve an expected return of 36.45% with a risk level of 18.86%. This suggests room for improvement in balancing risk and return. Consider removing overlapping, highly correlated assets and redistributing weights to align with the Efficient Frontier. This approach can enhance the portfolio's efficiency, potentially leading to higher returns for the same level of risk.

Dividends Info

  • Apple Inc 0.40%
  • Avantis® U.S. Small Cap Value ETF 1.60%
  • American Express Company 0.90%
  • Costco Wholesale Corp 0.50%
  • Chevron Corp 4.60%
  • Alphabet Inc Class C 0.30%
  • JPMorgan Chase & Co 1.90%
  • The Coca-Cola Company 3.10%
  • Eli Lilly and Company 0.70%
  • Meta Platforms Inc. 0.30%
  • Microsoft Corporation 0.70%
  • Occidental Petroleum Corporation 1.40%
  • Defiance Quantum 0.50%
  • Starbucks Corporation 2.60%
  • Sirius XM Holding Inc 4.70%
  • Direxion Daily S&P500® Bull 3X Shares 0.50%
  • ProShares UltraPro QQQ 1.20%
  • Visa Inc. Class A 0.70%
  • Vanguard Real Estate Index Fund ETF Shares 3.90%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total International Stock Index Fund ETF Shares 3.40%
  • Walmart Inc 0.70%
  • Weighted yield (per year) 1.10%

The portfolio's overall dividend yield is 1.1%, with notable contributions from companies like Chevron and Coca-Cola. Dividends provide a steady income stream, which can be particularly appealing in volatile markets. However, the focus on growth stocks means the yield is relatively low compared to income-focused portfolios. For investors seeking higher income, consider increasing allocations to high-dividend stocks or dividend-focused ETFs. This can enhance cash flow and provide a cushion during periods of market volatility.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Defiance Quantum 0.40%
  • Direxion Daily S&P500® Bull 3X Shares 0.91%
  • ProShares UltraPro QQQ 0.88%
  • Vanguard Real Estate Index Fund ETF Shares 0.12%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.09%

The portfolio's total expense ratio (TER) is 0.09%, which is impressively low. This cost efficiency supports better long-term performance by minimizing the drag on returns. While some ETFs have higher fees, like Direxion Daily S&P500® Bull 3X Shares at 0.91%, the overall costs remain competitive. To maintain cost-effectiveness, regularly review asset fees and consider replacing high-cost funds with lower-cost alternatives. This strategy can help maximize net returns and contribute to the portfolio's growth objectives.

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