A growth-focused portfolio emphasizing US equities with significant technology sector exposure

Report created on Dec 6, 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 heavily weighted toward US equities, with a substantial 40% allocation in the Vanguard S&P 500 ETF. Additionally, 20% is invested in both Avantis® U.S. Small Cap Value ETF and VanEck Semiconductor ETF, indicating a focus on growth and technology. The remaining 20% is split between international and dividend-focused ETFs, providing some diversification. Such a composition is relevant as it suggests a growth-oriented strategy, primarily driven by large-cap US stocks with some exposure to smaller companies and international markets. To enhance diversification, consider increasing the allocation to international or non-U.S. sectors, which may help mitigate risks associated with domestic market volatility.

Growth Info

Historically, the portfolio has delivered a strong compound annual growth rate (CAGR) of 20.48%, albeit with a maximum drawdown of -35.39%. This suggests that while the portfolio has offered high returns, it has also experienced significant volatility. Understanding past performance is crucial because it helps set realistic expectations about potential risks and rewards. However, remember that past performance does not guarantee future results. To manage drawdowns, consider incorporating more defensive assets or strategies that can provide stability during market downturns.

Projection Info

The Monte Carlo simulation, which uses historical data to project future outcomes, shows a wide range of potential returns. With 1,000 simulations, the portfolio's 5th percentile return is 75.81%, and the 50th percentile is 805.71%. This illustrates the uncertainty and variability inherent in investment outcomes. While simulations provide a probabilistic view of future performance, they are limited by the accuracy of historical data and assumptions. It would be prudent to use these projections as one of many tools when planning for the future, ensuring that expectations remain flexible and adaptable.

Asset classes Info

  • Stocks
    100%

The portfolio is almost entirely composed of stocks, with over 99% allocated to equities. This heavy reliance on a single asset class suggests a high-risk, high-reward strategy typical of growth-focused portfolios. While equities can offer substantial growth potential, they also expose the portfolio to significant market volatility. To balance this risk, consider diversifying into other asset classes such as bonds or real assets, which could provide stability and reduce overall portfolio volatility without sacrificing growth potential.

Sectors Info

  • Technology
    38%
  • Financials
    15%
  • Industrials
    9%
  • Consumer Discretionary
    9%
  • Health Care
    7%
  • Energy
    6%
  • Telecommunications
    5%
  • Consumer Staples
    5%
  • Basic Materials
    3%
  • Utilities
    2%
  • Real Estate
    1%

The portfolio has a significant concentration in the technology sector, which accounts for approximately 37.54% of the total allocation. This focus on technology can drive growth, given the sector's historical performance and innovation potential. However, such concentration also increases vulnerability to sector-specific downturns. Diversifying across more sectors could mitigate this risk, providing a buffer against technology sector volatility. Consider balancing exposure by increasing allocations to underrepresented sectors, such as utilities or real estate, which often behave differently from tech stocks.

Regions Info

  • North America
    85%
  • Europe Developed
    6%
  • Asia Developed
    4%
  • Asia Emerging
    2%
  • Japan
    2%
  • Australasia
    1%

Geographically, the portfolio is predominantly focused on North America, with 84.61% exposure. While this reflects a strong bias towards the U.S. market, it limits the benefits of global diversification, which can reduce risk by spreading investments across different economic environments. Expanding geographical exposure, particularly in emerging markets or underrepresented regions, can enhance diversification and potentially capture growth opportunities outside the U.S. Consider rebalancing the portfolio to include more international assets, which might improve risk-adjusted returns.

Redundant positions Info

  • SPDR Portfolio MSCI Global Stock Market
    Vanguard S&P 500 ETF
    High correlation

The portfolio exhibits high correlation among certain assets, particularly between the SPDR Portfolio MSCI Global Stock Market and the Vanguard S&P 500 ETF. High correlation indicates that these assets tend to move in tandem, offering limited diversification benefits. Understanding asset correlation is vital for risk management, as it helps identify redundant holdings that do not contribute to portfolio diversity. To improve diversification, consider reducing exposure to highly correlated assets and replacing them with those that have lower correlation, potentially enhancing risk-adjusted returns.

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 can be optimized using the Efficient Frontier, which identifies the best possible risk-return ratio for a given set of assets. Current allocations could be adjusted to achieve optimal efficiency, focusing on balancing risk and return. This involves reallocating funds among existing assets to maximize returns for a given level of risk or minimize risk for a given return target. Consider using optimization tools to explore potential changes, ensuring that the portfolio remains aligned with growth objectives while improving its risk-return profile.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.50%
  • Schwab U.S. Dividend Equity ETF 2.50%
  • VanEck Semiconductor ETF 0.40%
  • SPDR Portfolio MSCI Global Stock Market 1.70%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total International Stock Index Fund ETF Shares 2.90%
  • Weighted yield (per year) 1.36%

The portfolio's overall dividend yield stands at 1.36%, with the Vanguard Total International Stock Index Fund ETF Shares contributing the highest yield of 2.9%. Dividends can provide a steady income stream and add to total returns, especially during periods of market volatility. However, the current yield indicates a focus on growth over income. Investors seeking higher income may want to increase allocations to dividend-paying assets or explore alternative income-generating investments, balancing growth with the need for regular income.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • VanEck Semiconductor ETF 0.35%
  • SPDR Portfolio MSCI Global Stock Market 0.09%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.15%

The portfolio's total expense ratio (TER) is 0.15%, which is relatively low, indicating cost efficiency. Lower costs can significantly enhance long-term returns as they minimize the erosion of gains. However, the VanEck Semiconductor ETF has a higher expense ratio of 0.35%, which could be reduced by exploring similar ETFs with lower fees. Regularly reviewing and optimizing fund choices to ensure cost-effectiveness can improve net returns over time. Consider consolidating holdings into lower-cost alternatives if they align with the investment strategy.

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