A tech-heavy growth portfolio with limited sector and geographic diversification

Report created on Dec 27, 2024

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 technology-focused ETFs, with nearly 80% concentrated in two funds. Such a structure may limit diversification benefits, as it focuses predominantly on growth-oriented equities. Compared to balanced portfolios, this composition lacks exposure to fixed income and other asset classes, which could buffer against market volatility. To enhance diversification, consider introducing assets from different classes, such as bonds or alternative investments, which can provide stability and reduce overall risk during downturns.

Growth Info

Historically, the portfolio has shown impressive growth, with a Compound Annual Growth Rate (CAGR) of 22.53%. This indicates strong past performance, likely driven by the tech sector's robust growth. However, the maximum drawdown of -33.5% highlights vulnerability during market corrections. Comparing this to benchmarks like the S&P 500, which typically has lower drawdowns, suggests that the portfolio's high growth comes with increased risk. Balancing growth with stability could be achieved by incorporating less volatile assets, reducing potential losses during downturns.

Projection Info

The Monte Carlo simulation projects a wide range of potential outcomes, with the median scenario suggesting a 1,071.61% increase. This tool uses historical data to model future possibilities, but it's important to note that past performance doesn't guarantee future results. With 992 out of 1,000 simulations showing positive returns, the outlook appears optimistic. However, relying solely on historical trends can be misleading, especially in volatile markets. Diversifying further could help mitigate risks and provide more consistent returns across various market conditions.

Asset classes Info

  • Stocks
    100%

The portfolio is overwhelmingly invested in stocks, with 99.74% of assets in equities. This heavy reliance on a single asset class can amplify returns during bull markets but also increase risk during downturns. Compared to more diversified portfolios, which might include bonds or commodities, this allocation is quite narrow. To achieve a more balanced risk-return profile, consider incorporating other asset classes. Bonds, for instance, can provide steady income and reduce volatility, helping to stabilize the portfolio during market fluctuations.

Sectors Info

  • Technology
    62%
  • Consumer Discretionary
    8%
  • Financials
    7%
  • Telecommunications
    6%
  • Health Care
    5%
  • Industrials
    4%
  • Energy
    2%
  • Consumer Staples
    2%
  • Basic Materials
    1%
  • Utilities
    1%
  • Real Estate
    1%

With over 62% of the portfolio in technology, there is a significant sector concentration. While this can lead to high returns in a booming tech market, it also exposes the portfolio to sector-specific risks, such as regulatory changes or tech bubble bursts. Compared to a more evenly distributed sector allocation, this concentration increases volatility. Diversifying across sectors like healthcare, consumer goods, or industrials could reduce risk and enhance stability, aligning the portfolio more closely with broader market benchmarks.

Regions Info

  • North America
    99%

The portfolio's geographic allocation is predominantly in North America, covering 99.3% of investments. This lack of international exposure limits diversification benefits and may miss out on growth opportunities in emerging markets. Compared to global benchmarks, which typically have a more balanced geographic distribution, this allocation is narrow. Increasing exposure to international markets, particularly in Europe or Asia, could enhance diversification, reduce regional risk, and potentially capture growth in other economies.

Redundant positions Info

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

The portfolio's assets, particularly the Vanguard Information Technology and Schwab U.S. Large-Cap Growth ETFs, exhibit high correlation. This means they tend to move in tandem, which can limit diversification benefits. In times of market downturns, such correlation can exacerbate losses. To improve diversification, consider replacing one of these highly correlated assets with a less correlated option. This change could help manage risk better and provide a more balanced performance across different market conditions.

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 can potentially be optimized using the Efficient Frontier concept, which aims to achieve the best possible risk-return ratio with the current assets. This involves reallocating funds to minimize risk for a given return level. However, the current high correlation between assets may limit optimization benefits. Before optimizing, consider diversifying the asset base to include less correlated investments. This could enhance the portfolio's efficiency, balancing risk and return more effectively while aligning with growth objectives.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.60%
  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • SPDR S&P 500 ETF Trust 0.80%
  • Vanguard Information Technology Index Fund ETF Shares 0.60%
  • Weighted yield (per year) 0.65%

The portfolio's dividend yield is relatively low at 0.65%, reflecting its focus on growth rather than income. While growth-oriented investments can lead to higher capital appreciation, dividends provide a steady income stream and can cushion against market volatility. For investors seeking regular income, incorporating higher-dividend-paying assets might be beneficial. This approach can enhance the portfolio's total return and provide some stability during periods of market stress, balancing growth with income.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • SPDR S&P 500 ETF Trust 0.10%
  • Vanguard Information Technology Index Fund ETF Shares 0.10%
  • Weighted costs total (per year) 0.09%

The total expense ratio (TER) of the portfolio is 0.09%, which is impressively low. This cost efficiency supports better long-term performance by minimizing fees that can erode returns over time. Compared to higher-cost portfolios, this structure is well-aligned with best practices for cost management. Maintaining this low-cost approach is advantageous, but it's also worth exploring whether any cost reductions are possible without sacrificing quality, such as replacing higher-fee funds with equally effective lower-cost alternatives.

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