A growth-focused portfolio with strong tech emphasis and moderate diversification potential

Report created on Dec 10, 2024

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

This portfolio is predominantly composed of equity ETFs, with a 50% allocation to the Vanguard Growth Index Fund ETF. It includes significant exposure to the technology and healthcare sectors, each making up 20% of the portfolio. The remaining 10% is split between a bond ETF and an international equity ETF, each holding a 5% stake. This composition suggests a focus on growth through equities, with limited diversification into bonds and international markets. A more balanced asset allocation could potentially mitigate risks associated with market volatility and sector concentration.

Growth Info

Historically, the portfolio has demonstrated robust growth, with a compound annual growth rate (CAGR) of 15.71%. However, it experienced a significant maximum drawdown of -31.8%, indicating vulnerability to market downturns. This performance suggests that while the portfolio can deliver strong returns, it is also susceptible to substantial losses during market corrections. Investors should be prepared for potential volatility and consider strategies to protect against downside risk, such as diversification or hedging.

Projection Info

Monte Carlo simulations, which use historical data to forecast potential future outcomes, show varied results for this portfolio. With 1,000 simulations, the portfolio's annualized return is projected at 12.59%. The 5th percentile outcome suggests a potential 45.76% return, while the median is at 337.14%. However, these projections are based on past data and may not fully account for future market conditions. Investors should use these projections as a guide but remain flexible in their strategies to adapt to changing market dynamics.

Asset classes Info

  • Stocks
    94%
  • Bonds
    5%
  • Cash
    1%

The portfolio is heavily weighted towards stocks, comprising over 94% of the total allocation. Bonds make up just under 5%, offering minimal diversification benefits. This skew towards equities reflects a high-risk, high-reward strategy typical of growth-focused portfolios. To enhance risk management, investors might consider increasing the bond allocation or exploring alternative asset classes, such as real estate or commodities, to reduce reliance on equity market performance.

Sectors Info

  • Technology
    45%
  • Health Care
    24%
  • Consumer Discretionary
    7%
  • Telecommunications
    7%
  • Financials
    4%
  • Industrials
    2%
  • Consumer Staples
    1%
  • Basic Materials
    1%
  • Real Estate
    1%
  • Energy
    1%

The portfolio is concentrated in the technology sector, accounting for over 45% of the allocation, followed by healthcare at nearly 24%. This concentration suggests a strong bet on these sectors' continued growth but also exposes the portfolio to sector-specific risks. Investors should be aware of the potential for sector volatility and consider diversifying into other sectors, such as consumer staples or industrials, to reduce dependency on tech and healthcare performance.

Regions Info

  • North America
    90%
  • Europe Developed
    2%
  • Asia Emerging
    1%
  • Japan
    1%
  • Asia Developed
    1%

Geographically, the portfolio is heavily biased towards North America, with over 90% exposure. This concentration limits the benefits of global diversification and increases vulnerability to regional economic downturns. Expanding exposure to other regions, such as Europe or emerging markets, could enhance diversification and provide opportunities for growth in different economic environments. A more geographically balanced portfolio can help mitigate risks associated with regional market fluctuations.

Redundant positions Info

  • Vanguard Information Technology Index Fund ETF Shares
    Vanguard Growth Index Fund ETF Shares
    High correlation

The portfolio includes highly correlated assets, particularly within the technology sector, as seen with the Vanguard Growth Index Fund ETF and the Vanguard Information Technology Index Fund ETF. High correlation means these assets tend to move in tandem, reducing diversification benefits. To improve risk management, investors should aim to include assets with lower correlations, which can help stabilize returns during market volatility and enhance the portfolio's overall resilience.

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.

Optimizing this portfolio using the Efficient Frontier involves adjusting the current asset allocation to achieve the best possible risk-return balance. The high correlation between some assets, like the technology-focused ETFs, suggests that diversification could be improved by reducing overlap. By reallocating funds to less correlated assets or sectors, investors can potentially enhance the portfolio's efficiency. This optimization aims to achieve a more favorable risk-return ratio while maintaining the portfolio's growth objectives.

Dividends Info

  • Vanguard Total Bond Market Index Fund ETF Shares 3.60%
  • Vanguard FTSE All-World ex-US Index Fund ETF Shares 2.90%
  • Vanguard Information Technology Index Fund ETF Shares 0.60%
  • Vanguard Health Care Index Fund ETF Shares 1.40%
  • Vanguard Growth Index Fund ETF Shares 0.50%
  • Weighted yield (per year) 0.98%

The portfolio's dividend yield is relatively low at 0.98%, reflecting its growth-oriented focus. While dividends provide a steady income stream, the emphasis here is on capital appreciation. Investors seeking income might consider increasing exposure to higher-yielding assets, such as dividend-focused ETFs or bonds, to balance growth with income generation. This approach can provide a cushion during periods of market volatility and contribute to long-term wealth accumulation.

Ongoing product costs Info

  • Vanguard Total Bond Market Index Fund ETF Shares 0.03%
  • Vanguard FTSE All-World ex-US Index Fund ETF Shares 0.07%
  • Vanguard Information Technology Index Fund ETF Shares 0.10%
  • Vanguard Health Care Index Fund ETF Shares 0.10%
  • Vanguard Growth Index Fund ETF Shares 0.04%
  • Weighted costs total (per year) 0.06%

The portfolio benefits from low costs, with a total expense ratio (TER) of 0.06%. Low costs are advantageous as they enhance net returns over time, allowing more of the portfolio's growth to compound. However, investors should remain vigilant about any changes in fund fees and consider cost-effective alternatives if fees increase. Maintaining a focus on minimizing costs can significantly impact long-term investment performance, especially in a growth-oriented portfolio.

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