A tech-focused high-growth portfolio with limited diversification across sectors and regions
Report created on Apr 21, 2025Risk profile
5/7
Diversification profile
2/5
Positions
-
VO Vanguard S&P 500 ETF
VOO - US9229083632 90.00% -
QQ Invesco QQQ Trust
QQQ - US46090E1038 10.00%
The portfolio is heavily weighted towards two major ETFs: the Vanguard S&P 500 ETF at 90% and the Invesco QQQ Trust at 10%. This composition leans heavily into U.S. large-cap equities, reflecting a strong focus on well-established companies. While this provides exposure to reliable growth, the limited diversification could expose the portfolio to concentrated risks. Expanding into other asset classes or regions could help mitigate these risks and improve balance.
Growth
Historically, the portfolio has delivered a robust Compound Annual Growth Rate (CAGR) of 13.10%, significantly outperforming many benchmarks. With a maximum drawdown of -33.24%, it indicates potential volatility during downturns. This performance is impressive, but it's crucial to remember that past performance does not guarantee future results. Investors should prepare for potential fluctuations and consider strategies to manage risk, such as diversifying into different asset classes.
Projection
Using Monte Carlo simulations, this portfolio has a median projected growth of 508.5% over a given period, with a high probability of positive returns. These simulations provide a range of potential outcomes based on historical data, offering insights into the portfolio's future performance. However, it's important to note that simulations are not foolproof and rely on assumptions that may not hold in the future. Regularly reviewing and adjusting the portfolio can help align it with evolving market conditions and personal goals.
Asset classes
- Stocks 100%
The portfolio's allocation is 100% in stocks, lacking diversification across asset classes. While equities often provide strong growth potential, they also come with higher risk. Diversifying into bonds or other asset classes could stabilize returns and reduce risk. This lack of diversity may not suit all investors, particularly those seeking to reduce volatility. Considering alternative investments can help achieve a more balanced risk-return profile.
Sectors
- Technology 33%
- Financials 13%
- Consumer Discretionary 11%
- Health Care 11%
- Telecommunications 10%
- Industrials 7%
- Consumer Staples 6%
- Energy 3%
- Utilities 3%
- Real Estate 2%
- Basic Materials 2%
The portfolio is heavily concentrated in technology, making up 33% of the allocation. While this sector has been a strong performer, it can also be volatile, especially during interest rate changes. Other significant sectors include financial services and consumer cyclicals. This concentration could lead to increased risk if any of these sectors underperform. Broadening sector exposure can enhance stability and reduce reliance on a few industries.
Regions
- North America 99%
- Europe Developed 1%
Geographically, the portfolio is almost entirely focused on North America, with 99% allocation. This concentration limits exposure to international markets, which can offer diversification benefits and growth opportunities. Expanding into emerging markets or other developed regions can reduce geographic risk and tap into global economic growth. Balancing U.S. and international investments can help mitigate regional downturns and enhance portfolio resilience.
Market capitalization
- Mega-cap 48%
- Large-cap 34%
- Mid-cap 17%
- Small-cap 1%
The portfolio's market capitalization is skewed towards mega and big caps, comprising 82% of the allocation. This focus on large, established companies typically offers stability and reliable growth. However, it may miss out on the higher growth potential of small and mid-cap stocks. Including a broader range of market capitalizations could capture growth from smaller companies and enhance overall returns while spreading risk.
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 with the current assets. By adjusting the allocation between the Vanguard S&P 500 ETF and the Invesco QQQ Trust, it may be possible to enhance returns or reduce risk. This approach focuses on maximizing efficiency, but it's crucial to balance this with diversification and personal investment goals.
Dividends
- Invesco QQQ Trust 0.50%
- Vanguard S&P 500 ETF 1.40%
- Weighted yield (per year) 1.31%
The portfolio offers a moderate dividend yield of 1.31%, primarily from the Vanguard S&P 500 ETF. Dividends can provide a steady income stream and contribute to total returns, especially in low-growth periods. For investors seeking income, increasing exposure to high-dividend stocks or funds could enhance yield. Balancing growth and income strategies can support different financial goals and improve portfolio resilience.
Ongoing product costs
- Invesco QQQ Trust 0.20%
- Vanguard S&P 500 ETF 0.03%
- Weighted costs total (per year) 0.05%
The portfolio's total expense ratio (TER) is low at 0.05%, indicating cost efficiency. Lower costs can significantly enhance long-term returns by reducing the drag on performance. This efficiency aligns well with best practices for maximizing investment returns. Maintaining a focus on low-cost funds can continue to support strong performance, but it's also important to ensure these funds align with broader diversification and risk management goals.
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