High-Risk Low-Diversity Growth Portfolio Dominated by Technology Sector and North American Stocks

Report created on Dec 4, 2024

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

This portfolio consists of two main ETFs, with a significant 57.14% allocation to the Vanguard Information Technology Index Fund and a 42.86% allocation to the Vanguard Total Stock Market Index Fund. The heavy concentration in technology stocks contributes to the portfolio's growth profile. However, this also indicates a low level of diversification, which can expose the portfolio to sector-specific risks. To improve diversification, consider exploring additional asset classes or sectors that might balance potential risks and returns.

Growth Info

A hypothetical initial investment in this portfolio would have experienced a robust CAGR of 18.41%, reflecting strong historical performance. However, it's important to note the maximum drawdown of -32.9%, which underscores the portfolio's susceptibility to market volatility. The concentration of returns over just 40 days suggests that the portfolio's performance is highly dependent on specific market events. To mitigate risk, it might be beneficial to explore strategies that smooth out returns over time.

Projection Info

Using a Monte Carlo simulation with 1,000 iterations, the portfolio shows a wide range of potential outcomes. The end portfolio values range from a 5th percentile of 154.46% to a 67th percentile of 1,197.85%, with all simulations resulting in positive returns. The annualized return across simulations is 19.05%. This indicates a strong potential for future growth, but the variability in outcomes suggests the need for careful risk management. Diversifying investments could help stabilize returns and reduce downside risk.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily weighted in stocks, with 99.68% of assets allocated to equities and a negligible 0.32% in cash. This high concentration in equities aligns with a growth-oriented strategy but also increases exposure to market fluctuations. Balancing the portfolio with other asset classes, such as bonds or real estate, could enhance stability and provide a buffer during market downturns. Consider evaluating the risk-return trade-offs of adding different asset classes to achieve a more balanced portfolio.

Sectors Info

  • Technology
    70%
  • Financials
    6%
  • Health Care
    5%
  • Consumer Discretionary
    4%
  • Industrials
    4%
  • Telecommunications
    4%
  • Consumer Staples
    2%
  • Energy
    2%
  • Real Estate
    1%
  • Utilities
    1%
  • Basic Materials
    1%

The portfolio is dominated by the technology sector, which comprises 69.90% of the total allocation. This heavy sector concentration can lead to increased volatility and sector-specific risks. Other sectors, such as financial services and healthcare, have minimal representation. To mitigate sector risk, consider diversifying across a broader range of sectors. This can help cushion the portfolio against sector-specific downturns and contribute to more stable long-term growth.

Regions Info

  • North America
    99%

Geographically, the portfolio is overwhelmingly concentrated in North America, with 99.27% of assets allocated to this region. This lack of geographic diversification may expose the portfolio to region-specific economic risks. Minimal exposure to Europe, Asia, and other regions suggests an opportunity to diversify geographically. Expanding investments into other regions can provide exposure to different economic cycles and potentially enhance returns while reducing regional risk.

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's optimization analysis suggests focusing on diversification before seeking riskier or more conservative allocations along the efficient frontier. Currently, the portfolio's low diversification limits its potential to optimize risk-adjusted returns. By incorporating additional asset classes or sectors, the portfolio can achieve a more balanced risk-return profile. Once diversification is improved, moving along the efficient frontier can help align the portfolio with specific risk tolerance and financial goals.

Dividends Info

  • Vanguard Information Technology Index Fund ETF Shares 0.60%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.20%
  • Weighted yield (per year) 0.86%

The portfolio's dividend yield is relatively modest at 0.86%, with the Vanguard Information Technology Index Fund contributing 0.6% and the Vanguard Total Stock Market Index Fund 1.2%. While dividends are not a primary focus for growth-oriented portfolios, they can provide a steady income stream and contribute to total returns. To enhance dividend income, consider incorporating dividend-focused investments. This could provide a balance between growth and income, supporting financial goals over the long term.

Ongoing product costs Info

  • Vanguard Information Technology Index Fund ETF Shares 0.10%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Weighted costs total (per year) 0.07%

The portfolio benefits from low costs, with a total expense ratio (TER) of 0.07%. The Vanguard Information Technology Index Fund has a 0.1% expense ratio, while the Vanguard Total Stock Market Index Fund is even lower at 0.03%. These low costs are advantageous, as they help maximize net returns over time. It's important to maintain a focus on keeping investment costs low, as high fees can erode returns. Regularly reviewing and optimizing expenses can contribute to better long-term performance.

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