A growth-focused portfolio with high US exposure and moderate sector diversification

Report created on Jan 16, 2025

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

This portfolio is heavily weighted towards ETFs, with the Vanguard S&P 500 ETF making up nearly half. The Invesco NASDAQ 100 ETF and Avantis U.S. Small Cap Value ETF also hold significant portions. Such a composition suggests a strong focus on US equities, particularly large-cap and growth-oriented stocks. Compared to common benchmarks, this portfolio leans heavily on major indices, which could limit exposure to other asset classes. While this setup is typical for growth-oriented portfolios, it may benefit from increased diversification by incorporating other asset types like bonds or international stocks to balance risk.

Growth Info

Historically, this portfolio has performed well, with a CAGR of 17.78%. This suggests strong growth, outperforming typical market benchmarks like the S&P 500 over similar periods. However, the maximum drawdown of -27.59% indicates significant volatility, underscoring the risks associated with a growth-focused strategy. Understanding past performance helps set expectations, but it's crucial to remember that it doesn't guarantee future results. To mitigate potential downturns, consider diversifying further or employing strategies to hedge against market volatility.

Projection Info

Monte Carlo simulations project a wide range of potential outcomes, with an annualized return of 22.55%. These simulations use historical data to model future performance, providing a probabilistic view of potential returns. Although the portfolio shows a high probability of positive returns, the wide range of outcomes highlights inherent uncertainties. It's essential to approach these projections with caution, as real-world events can diverge from historical patterns. Regularly reviewing and adjusting the portfolio can help align it with changing market conditions and personal goals.

Asset classes Info

  • Stocks
    100%

The portfolio is almost entirely composed of stocks, with a negligible allocation to cash. This high equity exposure aligns with a growth strategy but limits diversification benefits that other asset classes, like bonds, could offer. Compared to diversified benchmarks, this portfolio's lack of fixed-income securities may increase volatility and risk. Introducing a small percentage of bonds or other non-equity investments could enhance stability and provide a buffer against market downturns, balancing the portfolio's risk-return profile.

Sectors Info

  • Technology
    39%
  • Telecommunications
    14%
  • Consumer Discretionary
    11%
  • Financials
    9%
  • Industrials
    8%
  • Health Care
    7%
  • Consumer Staples
    5%
  • Energy
    4%
  • Basic Materials
    2%
  • Utilities
    2%
  • Real Estate
    1%

Technology dominates the sector allocation, comprising nearly 39% of the portfolio. This concentration suggests a reliance on tech-driven growth, which can lead to higher volatility, especially during periods of regulatory scrutiny or interest rate hikes. Other sectors like communication services and consumer cyclicals are also significant but less pronounced. While tech-heavy portfolios can capture substantial growth, they might benefit from rebalancing to include more defensive sectors like healthcare or consumer staples, which can provide stability during market turbulence.

Regions Info

  • North America
    96%
  • Europe Developed
    2%
  • Japan
    1%
  • Asia Emerging
    1%

The portfolio's geographic allocation is heavily skewed towards North America, with over 95% exposure. This concentration limits international diversification, potentially missing out on growth opportunities in other regions. While US markets have historically been strong, global diversification can reduce region-specific risks and enhance long-term returns. Incorporating more international equities, particularly from emerging markets, could provide additional growth prospects and help mitigate risks associated with domestic economic downturns or policy changes.

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 potentially be optimized using the Efficient Frontier, which seeks the best possible risk-return ratio for a given set of assets. This involves adjusting the current asset allocations to achieve a more efficient balance. While the portfolio is growth-oriented, exploring optimization can help identify ways to maintain or enhance returns while managing risk. It's important to note that optimization focuses on the current assets and their allocations, so any changes should align with personal risk tolerance and investment goals.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.60%
  • Alphabet Inc Class C 0.30%
  • Invesco NASDAQ 100 ETF 0.60%
  • Defiance Quantum 0.60%
  • Vanguard S&P 500 ETF 1.20%
  • Weighted yield (per year) 0.96%

The portfolio's dividend yield is relatively low at 0.96%, reflecting its growth orientation. While dividends can provide a steady income stream, growth-focused portfolios often prioritize capital appreciation over income. This approach suits investors seeking long-term wealth accumulation rather than immediate income. However, if income generation becomes a priority, consider incorporating higher-yielding assets or dividend-focused funds to balance growth with regular income, ensuring the portfolio aligns with evolving financial goals.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Invesco NASDAQ 100 ETF 0.15%
  • Defiance Quantum 0.40%
  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.13%

The portfolio's total expense ratio (TER) is 0.13%, which is impressively low. This cost efficiency supports better long-term returns by minimizing the drag on performance. Low fees are crucial in compounding growth over time, making this portfolio well-positioned in terms of cost management. To maintain this advantage, regularly review the expense ratios of all holdings and consider replacing higher-cost investments with lower-cost alternatives if available, ensuring that the portfolio remains cost-effective as market conditions and investment options evolve.

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