A growth-focused portfolio with strong U.S. tech exposure and low diversification

Report created on Jan 22, 2025

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 large-cap U.S. equities, with the Vanguard S&P 500 ETF making up 72.4% of the total. This concentration in a single ETF indicates a strong focus on established, large-cap companies. The inclusion of the Invesco NASDAQ 100 ETF at 14.2% further emphasizes a tilt towards growth-oriented technology stocks. NVIDIA Corporation, a single stock, constitutes 7.6%, adding to this tech emphasis. The Avantis U.S. Small Cap Value ETF at 5.8% attempts to diversify into smaller companies. While the portfolio is geared towards growth, its low diversification could pose risks if specific sectors or stocks underperform.

Growth Info

Historically, the portfolio has performed well, achieving a compound annual growth rate (CAGR) of 20.13%. This impressive return suggests that the portfolio has capitalized on the strong performance of U.S. equities, particularly in the technology sector. However, it’s important to note that the portfolio experienced a maximum drawdown of -29.24%, highlighting its vulnerability during market downturns. Comparing this against benchmarks like the S&P 500 can provide context for these results. While past performance is not indicative of future results, understanding these trends can guide future investment decisions.

Projection Info

The Monte Carlo simulation projects potential future outcomes based on historical data, providing a range of possible returns. With 1,000 simulations, the portfolio shows a 5th percentile return of 506.8% and a 50th percentile of 3,992.9%, indicating a wide range of potential outcomes. The 67th percentile projection at 7,091.4% suggests substantial growth potential. However, it's crucial to remember that these projections are hypothetical and rely on past data, which may not predict future performance accurately. Investors should consider these projections as one of many tools in assessing potential risks and returns.

Asset classes Info

  • Stocks
    100%

The portfolio is entirely composed of stocks, with no allocation to cash or other asset classes. This lack of diversification across asset classes means that the portfolio is highly exposed to equity market volatility. While this can lead to substantial growth during bull markets, it also increases the risk during downturns. Diversifying into other asset classes, such as bonds or real estate, could help mitigate risk and stabilize returns, especially for investors seeking a more balanced approach. Comparing this allocation against a diversified benchmark may highlight areas for improvement.

Sectors Info

  • Technology
    39%
  • Financials
    11%
  • Consumer Discretionary
    11%
  • Telecommunications
    9%
  • Health Care
    9%
  • Industrials
    7%
  • Consumer Staples
    5%
  • Energy
    3%
  • Utilities
    2%
  • Basic Materials
    2%
  • Real Estate
    2%

The portfolio is heavily concentrated in the technology sector, which accounts for 39% of the total allocation. This concentration can lead to higher volatility, especially during periods of market uncertainty or interest rate changes. Other sectors like financial services and consumer cyclicals are also represented, but to a lesser extent. While the tech focus has driven past performance, diversifying into other sectors could reduce risk and provide more balanced exposure. Aligning sector allocations with broader benchmarks could offer insights into potential diversification opportunities.

Regions Info

  • North America
    99%
  • Europe Developed
    1%

The portfolio's geographic allocation is overwhelmingly concentrated in North America, with 99% exposure. This heavy U.S. focus can limit diversification benefits and expose the portfolio to regional economic risks. While the U.S. market has performed well historically, global diversification could provide exposure to different economic cycles and growth opportunities. Allocating a portion of the portfolio to international markets, including emerging economies, could enhance diversification and potentially improve risk-adjusted returns. Comparing this geographic exposure against global benchmarks may highlight opportunities for expansion.

Market capitalization Info

  • Mega-cap
    49%
  • Large-cap
    30%
  • Mid-cap
    15%
  • Small-cap
    3%
  • Micro-cap
    3%

The portfolio is predominantly invested in mega-cap and large-cap stocks, making up 79% of the total allocation. This focus on larger companies provides stability and potential for consistent returns but may limit exposure to the growth potential of smaller companies. The small and micro-cap exposure is minimal at 6%, suggesting an opportunity to diversify further. Including more medium and small-cap stocks could enhance growth potential and provide a more balanced risk profile. Evaluating market cap distribution against benchmarks can offer insights for achieving optimal diversification.

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 may benefit from optimization using the Efficient Frontier concept, which seeks to achieve the best possible risk-return ratio. Currently, the portfolio's high concentration in specific sectors and asset classes suggests room for improvement. By adjusting the allocation of existing assets, the portfolio could potentially enhance returns for the same level of risk. This optimization focuses on maximizing efficiency rather than diversification. Investors should consider rebalancing to align with the Efficient Frontier, ensuring that the portfolio remains aligned with their risk tolerance and investment goals.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.50%
  • Invesco NASDAQ 100 ETF 0.60%
  • Vanguard S&P 500 ETF 1.20%
  • Weighted yield (per year) 1.04%

The portfolio's dividend yield is relatively low at 1.04%, reflecting its growth-oriented focus. While dividends can provide a steady income stream and contribute to total returns, this portfolio prioritizes capital appreciation over income generation. For investors seeking income, increasing exposure to dividend-paying stocks or ETFs could enhance yield. However, the current allocation aligns with a growth strategy, where reinvesting dividends can compound returns over time. Balancing growth and income objectives is key to meeting long-term investment goals.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Invesco NASDAQ 100 ETF 0.15%
  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.06%

The portfolio's total expense ratio (TER) is low at 0.06%, indicating cost efficiency. This low-cost structure is beneficial for long-term performance, as it minimizes the drag on returns. The Vanguard S&P 500 ETF, with a TER of 0.03%, contributes significantly to this cost efficiency. Keeping expenses low is crucial, especially in growth-focused portfolios where high returns are prioritized. Regularly reviewing and optimizing costs can help maintain this advantage. Investors should be mindful of any changes in expense ratios that could impact overall returns.

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