Growth-focused portfolio with significant tech exposure and limited geographic diversification

Report created on Dec 30, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

1/5
Single-Focused
Less diversification More diversification

Positions

This portfolio is predominantly composed of ETFs, with a strong focus on large-cap growth and technology stocks. The top four holdings account for over 68% of the portfolio, indicating a concentrated investment strategy. Compared to a balanced benchmark, this portfolio leans heavily towards growth-oriented equities, which can lead to higher potential returns but also increased volatility. To mitigate risk, consider diversifying into different asset classes or sectors. This approach can help balance the portfolio and reduce dependency on the performance of a few key holdings.

Growth Info

Historically, the portfolio has demonstrated impressive performance with a Compound Annual Growth Rate (CAGR) of 15.47%. However, it also experienced a significant maximum drawdown of -31.04%, highlighting potential volatility. This performance suggests that while the portfolio can deliver strong returns, it might not be suitable for those with a low risk tolerance. Comparing this to a typical balanced benchmark, the portfolio's returns are high, but so is the risk. Regularly reviewing performance against benchmarks can help maintain alignment with investment goals.

Projection Info

The Monte Carlo simulation, which uses historical data to project potential future outcomes, indicates a median return of 359.34%. While this suggests robust potential, it’s important to remember that past performance is not a guarantee of future results. The simulation shows a wide range of possible outcomes, emphasizing the inherent uncertainty in investing. To better prepare for future market conditions, consider stress-testing the portfolio under various scenarios. This can provide insights into how the portfolio might perform under different economic environments.

Asset classes Info

  • Stocks
    92%
  • Bonds
    8%
  • Cash
    1%

The portfolio is heavily weighted towards stocks, comprising over 91% of the total allocation, with minimal exposure to bonds and cash. This skewed allocation can lead to higher returns but also increases risk during market downturns. Diversification across asset classes is crucial for risk management. Consider gradually increasing bond and cash allocations to create a more balanced portfolio. This can provide stability and reduce volatility, especially in uncertain market conditions.

Sectors Info

  • Technology
    45%
  • Financials
    9%
  • Consumer Discretionary
    8%
  • Telecommunications
    8%
  • Health Care
    8%
  • Industrials
    6%
  • Consumer Staples
    4%
  • Basic Materials
    2%
  • Energy
    1%
  • Utilities
    1%
  • Real Estate
    1%

The portfolio has a significant concentration in the technology sector, accounting for nearly 45% of the total allocation. This heavy tech focus can lead to higher volatility, especially during periods of regulatory changes or interest rate hikes. While technology has been a strong performer, it's important to maintain sector balance to mitigate risk. Consider diversifying into other sectors like healthcare or industrials to achieve a more balanced sectoral exposure. This can enhance the portfolio's resilience against sector-specific risks.

Regions Info

  • North America
    89%
  • Europe Developed
    1%

With over 89% of the portfolio allocated to North American assets, geographic diversification is limited. This concentration exposes the portfolio to regional economic and political risks. Comparing to global benchmarks, this portfolio is under-diversified geographically. Expanding exposure to international markets can help mitigate regional risks and provide access to growth opportunities in emerging markets. Consider gradually increasing allocations to Europe, Asia, or other regions to enhance diversification and capture global growth potential.

Redundant positions Info

  • Vanguard Total Stock Market Index Fund ETF Shares
    Schwab U.S. Large-Cap Growth ETF
    Vanguard Growth Index Fund ETF Shares
    Vanguard S&P 500 ETF
    Invesco S&P 500® Quality ETF
    Vanguard Information Technology Index Fund ETF Shares
    Vanguard Total World Stock Index Fund ETF Shares
    High correlation

The portfolio contains several highly correlated assets, particularly among large-cap and growth-oriented ETFs. High correlation means these assets tend to move together, reducing diversification benefits. During market downturns, this can amplify losses. To improve diversification, consider replacing some of the overlapping ETFs with those that have lower correlation to the existing holdings. This can help smooth out volatility and enhance the portfolio's overall risk management.

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 be optimized using the Efficient Frontier, which seeks the best possible risk-return ratio. Currently, the portfolio's high correlation and concentration in certain sectors suggest room for improvement. By adjusting allocations among existing assets, you can potentially achieve a more efficient portfolio. This involves balancing risk and return to align with your investment goals. Remember, optimization is based on current holdings and does not necessarily imply diversification into new assets.

Dividends Info

  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • Fidelity® Government Money Market Fund 4.90%
  • Invesco S&P 500® Quality ETF 0.90%
  • iShares 0-5 Year TIPS Bond ETF 2.20%
  • Vanguard Intermediate-Term Treasury Index Fund ETF Shares 3.30%
  • Vanguard Information Technology Index Fund ETF Shares 0.60%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total World Stock Index Fund ETF Shares 1.90%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.20%
  • Vanguard Growth Index Fund ETF Shares 0.40%
  • Weighted yield (per year) 1.00%

The portfolio’s overall dividend yield is relatively low at 1.0%, reflecting its growth-oriented focus. While dividends can provide a steady income stream, this portfolio prioritizes capital appreciation. For investors seeking income, consider increasing exposure to higher-yielding assets. However, if the primary goal is growth, maintaining the current allocation may be appropriate. Balancing growth and income can be achieved by blending high-yield and growth-focused ETFs.

Ongoing product costs Info

  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • Invesco S&P 500® Quality ETF 0.15%
  • iShares 0-5 Year TIPS Bond ETF 0.03%
  • Vanguard Intermediate-Term Treasury Index Fund ETF Shares 0.04%
  • Vanguard Information Technology Index Fund ETF Shares 0.10%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total World Stock Index Fund ETF Shares 0.07%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Vanguard Growth Index Fund ETF Shares 0.04%
  • Weighted costs total (per year) 0.07%

The portfolio benefits from low costs, with a Total Expense Ratio (TER) of 0.07%. This is advantageous for long-term returns, as lower fees mean more capital remains invested. Compared to industry averages, these costs are impressively low, supporting better long-term performance. To maintain cost efficiency, regularly review and compare the expense ratios of current holdings with alternative options. This can help ensure that the portfolio remains cost-effective while pursuing its investment objectives.

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