A heavily US-focused portfolio with strong tech exposure and limited diversification opportunities

Report created on Dec 17, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

This portfolio is predominantly composed of two ETFs: the Vanguard S&P 500 ETF and the Invesco NASDAQ 100 ETF, with a substantial 69% and 31% allocation, respectively. This results in a heavy bias towards large-cap U.S. equities. Such a composition suggests a focus on growth through well-established companies. However, the limited number of ETFs could mean that the portfolio lacks diversification. Diversifying with more asset types or funds could potentially lower risk and smooth out returns. Consider exploring additional asset classes or sectors to enhance diversification and reduce dependency on U.S. large-cap equities.

Growth Info

Historically, the portfolio has performed well, with a compound annual growth rate (CAGR) of 16.38%. However, it has also experienced significant downturns, with a maximum drawdown of 27.56%. This indicates that while the portfolio has the potential for high returns, it is also susceptible to considerable volatility. Understanding past performance helps set expectations, but remember, past results don't guarantee future returns. To mitigate potential downturns, consider implementing strategies like rebalancing or diversifying with less volatile assets.

Projection Info

Monte Carlo simulations project a range of possible future outcomes for the portfolio by using historical data to simulate 1,000 potential scenarios. The median outcome predicts a significant growth of 786.88%, with most simulations showing positive returns. While this suggests a positive outlook, it's crucial to remember that simulations are based on past data and assumptions, which may not account for future market changes. Regularly review and adjust the portfolio to align with changing market conditions and personal financial goals.

Asset classes Info

  • Stocks
    100%

The portfolio is almost entirely allocated to stocks, with a negligible amount in cash. This high equity exposure can drive significant growth but also increases vulnerability to market volatility. A more balanced allocation among different asset classes, such as bonds or alternative investments, could reduce risk and provide more stability. Consider the addition of fixed-income assets or other non-correlated investments to achieve a more balanced risk-return profile.

Sectors Info

  • Technology
    39%
  • Consumer Discretionary
    12%
  • Telecommunications
    11%
  • Health Care
    9%
  • Financials
    9%
  • Industrials
    6%
  • Consumer Staples
    6%
  • Energy
    2%
  • Utilities
    2%
  • Basic Materials
    2%
  • Real Estate
    2%

With nearly 39% of the portfolio in technology, there is a significant sector concentration, followed by consumer cyclicals and communication services. While these sectors have high growth potential, they also carry higher risks, especially during economic downturns. Diversifying into other sectors like healthcare or utilities could help mitigate these risks. Evaluating sector performance and economic trends regularly can inform better allocation decisions to optimize returns while managing risk.

Regions Info

  • North America
    99%
  • Europe Developed
    1%

The portfolio is heavily weighted towards North American assets, with over 98% exposure. This geographic concentration may limit potential growth opportunities and increase vulnerability to regional economic downturns. Expanding exposure to international markets can enhance diversification and tap into growth in emerging economies. Consider gradually increasing allocations to non-U.S. markets to achieve a more globally diversified portfolio, thus spreading risk across different economic environments.

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.

Utilizing the Efficient Frontier, the portfolio can potentially be optimized to achieve a better risk-return balance. This involves adjusting the weightings of existing assets to find the most efficient allocation. However, it's important to note that this optimization is limited to the current assets and does not necessarily imply improved diversification. Regularly re-evaluating the portfolio and making data-driven adjustments can help maintain an optimal balance between risk and return, aligning with personal financial goals.

Dividends Info

  • Invesco NASDAQ 100 ETF 0.60%
  • Vanguard S&P 500 ETF 1.20%
  • Weighted yield (per year) 1.01%

The portfolio's dividend yield is relatively modest at 1.01%, reflecting its growth-oriented focus. While dividends contribute to total returns, they are not the primary driver for this portfolio. Investors seeking income might consider adding higher-yielding assets. Reinvesting dividends can also enhance compound growth over time. If income generation is a goal, explore adding dividend-focused funds or stocks to increase the yield without significantly altering the growth potential.

Ongoing product costs Info

  • Invesco NASDAQ 100 ETF 0.15%
  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.07%

With a total expense ratio of 0.07%, the portfolio costs are low, which is beneficial for long-term returns. Lower costs mean more of the investment return is retained by the investor. Continuously monitoring and minimizing expenses can significantly impact overall returns, especially over a long investment horizon. Keep an eye on expense ratios and consider switching to lower-cost alternatives if available, ensuring that the portfolio remains cost-efficient without sacrificing performance.

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