Growth Focused Portfolio with High Technology Exposure and Low Diversification Needs Optimization

Report created on Nov 25, 2024

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 tech-focused, with a significant portion allocated to technology ETFs, making up 72.43% of the portfolio. This concentration in technology suggests a strong belief in the sector's growth potential but also indicates a lack of diversification. With only four ETFs, the portfolio is highly concentrated, which can lead to increased volatility. While this setup might benefit from tech sector growth, it also exposes the portfolio to sector-specific risks. A more balanced approach could involve incorporating other sectors to mitigate risk and improve diversification.

Growth Info

Historically, the portfolio has demonstrated impressive performance, with a CAGR of 19.84%. This suggests that the portfolio has capitalized on the strong performance of the tech sector and broader market indices. However, the max drawdown of -36.21% indicates vulnerability during market downturns. The concentration in high-growth sectors can amplify both gains and losses. To maintain growth while managing risk, consider strategies to reduce volatility, such as diversifying into more stable sectors or asset classes, which could provide a buffer during market corrections.

Projection Info

Using a Monte Carlo simulation, the portfolio shows a wide range of potential outcomes, with a 50th percentile return of 1,102.7% and a 5th percentile return of 154.15%. This analysis, based on hypothetical initial investment, highlights the portfolio's potential for significant growth but also underscores the inherent risk. High returns are possible, but so are substantial losses. Diversifying the portfolio could help stabilize returns by reducing reliance on a single sector. Balancing high-growth opportunities with more stable investments can create a more resilient portfolio.

Asset classes Info

  • Stocks
    100%

The portfolio is almost entirely composed of stocks, with a negligible amount of cash, indicating a strong growth focus. This stock-heavy allocation aligns with a high-risk, high-reward strategy, suitable for those seeking capital appreciation. However, the lack of bonds or other asset classes means there is no cushion against market volatility. Introducing bonds or other fixed-income assets could provide stability and reduce risk. A more diversified asset class allocation could help balance the portfolio, offering both growth potential and downside protection.

Sectors Info

  • Technology
    72%
  • Telecommunications
    6%
  • Consumer Discretionary
    6%
  • Health Care
    4%
  • Financials
    3%
  • Consumer Staples
    3%
  • Industrials
    3%
  • Utilities
    1%
  • Energy
    1%
  • Basic Materials
    1%
  • Real Estate
    1%

With technology dominating the portfolio at 72.43%, there is a clear sector bias. While tech has been a strong performer, over-reliance on a single sector can be risky. Other sectors like healthcare, financial services, and consumer cyclicals are underrepresented. To mitigate sector-specific risks, consider redistributing some investments to achieve a more balanced sector allocation. This can help ensure that the portfolio is not overly dependent on the performance of the tech sector and can benefit from growth in other areas of the economy.

Regions Info

  • North America
    97%
  • Europe Developed
    2%
  • Asia Developed
    1%

Geographically, the portfolio is heavily skewed towards North America, comprising 96.77% of the allocation. This lack of international exposure could limit potential opportunities in other growing markets. While the U.S. has been a strong performer, diversifying into other regions could provide access to different economic cycles and reduce geographic risk. Considering investments in developed and emerging markets outside of North America could enhance diversification and offer exposure to new growth opportunities.

Redundant positions Info

  • Vanguard S&P 500 ETF
    Vanguard Information Technology Index Fund ETF Shares
    Invesco QQQ Trust
    High correlation

The portfolio exhibits high correlation among its assets, particularly between the Vanguard S&P 500 ETF, Vanguard Information Technology Index Fund ETF Shares, and Invesco QQQ Trust. This correlation suggests that these assets tend to move in the same direction, offering limited diversification benefits. To reduce portfolio risk, consider introducing assets with lower correlation to these ETFs. This could involve selecting investments that perform differently under varying market conditions, thereby enhancing the portfolio's resilience and reducing overall volatility.

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.

Before optimizing the portfolio, focus on addressing the high correlation among current assets. Reducing overlap can enhance diversification and improve risk-adjusted returns. Moving along the efficient frontier can help achieve a riskier or more conservative portfolio. To make it riskier, increase exposure to high-growth assets; to make it more conservative, add fixed-income securities. Balancing these elements can lead to a more optimized portfolio, aligning with personal risk tolerance and financial goals without drastically altering the current composition.

Dividends Info

  • Invesco QQQ Trust 0.60%
  • iShares Semiconductor ETF 0.70%
  • Vanguard Information Technology Index Fund ETF Shares 0.60%
  • Vanguard S&P 500 ETF 1.20%
  • Weighted yield (per year) 0.74%

The portfolio's dividend yield is relatively low at 0.74%, reflecting its growth-focused strategy. This yield is primarily driven by the Vanguard S&P 500 ETF, which offers a slightly higher dividend. While growth is the main objective, dividends can provide a steady income stream and help cushion against market volatility. To enhance dividend income, consider incorporating higher-yielding investments. This could involve balancing growth and income-generating assets, allowing for capital appreciation while benefiting from regular dividend payments.

Ongoing product costs Info

  • Invesco QQQ Trust 0.20%
  • iShares Semiconductor ETF 0.35%
  • Vanguard Information Technology Index Fund ETF Shares 0.10%
  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.15%

The portfolio's total expense ratio is 0.15%, which is quite low and indicates cost-efficient management. The low costs are primarily due to the Vanguard ETFs, which have minimal expense ratios. Keeping investment costs low is crucial for maximizing net returns over time. While the current cost structure is favorable, it's important to continually monitor and assess any changes in fees. Maintaining a low-cost portfolio ensures that more of the investment returns are retained, contributing to long-term growth and performance.

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