A growth-focused portfolio with significant tech exposure and low geographic diversification

Report created on Dec 18, 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 ETFs, with the SPDR S&P 500 ETF Trust making up 44.46% of the total. Invesco QQQ Trust and Vanguard S&P 500 ETF also hold significant portions at 23.75% and 22.13%, respectively. This composition indicates a strong focus on broad market indices and technology, as evidenced by the inclusion of the Vanguard Information Technology Index Fund ETF Shares and VanEck Semiconductor ETF. The portfolio's reliance on ETFs provides liquidity and diversification across various sectors, albeit with a pronounced emphasis on technology. To enhance diversification, consider incorporating different asset types like bonds or real estate, which can help balance risks associated with equity-heavy portfolios.

Growth Info

Historically, the portfolio has delivered a commendable compound annual growth rate (CAGR) of 16.67%, although it experienced a maximum drawdown of -31.78%. This suggests that while the portfolio can generate strong returns, it is also susceptible to significant downturns during market volatility. Understanding these trends is crucial for setting realistic expectations about potential performance. To mitigate the impact of future drawdowns, consider diversifying into more defensive sectors or asset classes that typically perform well during market downturns, such as consumer staples or utilities.

Projection Info

A Monte Carlo simulation using 1,000 scenarios projects an annualized return of 18.35% for the portfolio. This method uses historical data to simulate a range of potential outcomes, providing a probabilistic view of future performance. However, it's important to note that past performance does not guarantee future results, and unexpected market events can influence outcomes. The simulation's wide range, from a 5th percentile return of 125.61% to a 67th percentile return of 1,104.78%, reflects the inherent uncertainty in financial markets. To improve future projections, consider regularly reviewing and adjusting the portfolio based on changing market conditions and personal financial goals.

Asset classes Info

  • Stocks
    99%

The portfolio is predominantly composed of stocks, accounting for 99.34% of the total holdings, with minimal exposure to cash and unknown asset classes. This heavy allocation towards equities indicates a high-risk, high-reward investment strategy, which is suitable for investors with a long-term horizon and a higher risk tolerance. To achieve better risk-adjusted returns, consider incorporating fixed-income securities or alternative investments, which can provide stability and income, particularly during periods of market volatility.

Sectors Info

  • Technology
    44%
  • Consumer Discretionary
    11%
  • Telecommunications
    10%
  • Financials
    9%
  • Health Care
    8%
  • Industrials
    6%
  • Consumer Staples
    5%
  • Energy
    2%
  • Utilities
    2%
  • Real Estate
    1%
  • Basic Materials
    1%

Technology dominates the sectoral allocation, comprising 43.54% of the portfolio, followed by consumer cyclicals and communication services. This concentration in tech suggests a strong belief in the sector's growth potential but also exposes the portfolio to sector-specific risks. While tech has historically delivered impressive returns, it is also subject to rapid changes and regulatory scrutiny. To mitigate sector-specific risks, consider diversifying into other sectors like healthcare or financial services, which can offer growth opportunities while balancing the overall risk profile.

Regions Info

  • North America
    98%
  • Europe Developed
    1%
  • Asia Developed
    1%

Geographically, the portfolio is heavily skewed towards North America, with 97.72% of the assets allocated to the region. This lack of geographic diversification exposes the portfolio to region-specific risks, such as economic downturns or policy changes in the United States. To enhance geographic diversification and reduce regional risk, consider increasing exposure to international markets, particularly in Europe, Asia, or emerging markets, which can provide growth opportunities and mitigate the impact of regional economic fluctuations.

Redundant positions Info

  • Vanguard Information Technology Index Fund ETF Shares
    Invesco QQQ Trust
    High correlation
  • Vanguard S&P 500 ETF
    SPDR S&P 500 ETF Trust
    High correlation

The portfolio exhibits high correlation among certain assets, particularly between the Vanguard Information Technology Index Fund ETF Shares and Invesco QQQ Trust, as well as the Vanguard S&P 500 ETF and SPDR S&P 500 ETF Trust. High correlation means these assets tend to move in the same direction, reducing diversification benefits. To improve risk management, consider replacing some of these highly correlated assets with others that have lower correlation, thereby enhancing the portfolio's overall diversification and reducing potential volatility.

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 currently has opportunities for optimization using the Efficient Frontier, which aims to achieve the best possible risk-return ratio. By adjusting the allocation among existing assets, the portfolio can potentially enhance returns for a given level of risk or reduce risk for a given level of return. However, optimization does not necessarily mean diversification; it focuses on maximizing efficiency based on the current asset mix. Regularly revisiting the portfolio's allocation and making data-driven adjustments can help maintain an optimal balance aligned with the investor's risk tolerance and financial goals.

Dividends Info

  • Invesco QQQ Trust 0.40%
  • Fidelity® Government Money Market Fund 4.50%
  • SPDR S&P 500 ETF Trust 0.80%
  • Vanguard Information Technology Index Fund ETF Shares 0.60%
  • Vanguard S&P 500 ETF 1.20%
  • Weighted yield (per year) 0.77%

The portfolio's dividend yield is relatively modest at 0.77%, with the Vanguard S&P 500 ETF contributing the highest yield of 1.2%. While dividends can provide a steady income stream, this portfolio's focus appears to be more on capital appreciation than income generation. For investors seeking higher income, consider adding dividend-focused ETFs or stocks with a track record of consistent and growing dividends, which can complement the growth-oriented nature of the current holdings and provide a buffer during market downturns.

Ongoing product costs Info

  • Invesco QQQ Trust 0.20%
  • VanEck Semiconductor ETF 0.35%
  • SPDR S&P 500 ETF Trust 0.10%
  • Vanguard Information Technology Index Fund ETF Shares 0.10%
  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.12%

The portfolio's total expense ratio (TER) is 0.12%, which is relatively low, indicating cost-efficiency and minimal drag on returns. The Vanguard S&P 500 ETF offers the lowest cost at 0.03%, while the VanEck Semiconductor ETF is the most expensive at 0.35%. While the costs are generally low, further reducing them can enhance long-term returns, especially in a growth-focused portfolio. Consider reviewing the cost structure periodically and exploring lower-cost alternatives without compromising on the quality and potential returns of the investments.

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