A growth-focused portfolio with technology-heavy sectors and broad global diversification

Report created on Dec 26, 2024

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

4/5
Broadly Diversified
Less diversification More diversification

Positions

The portfolio consists of four ETFs, with a notable focus on international and technology sectors. The largest allocation is to the Vanguard FTSE All-World ex-US Index Fund ETF Shares at 30%, followed by the Vanguard Information Technology Index Fund ETF Shares and the Vanguard Growth Index Fund ETF Shares, each at 25%. The Vanguard Total World Stock Index Fund ETF Shares holds the remaining 20%. This composition leans heavily towards equities, aligning with a growth-focused strategy. Compared to typical benchmarks, this portfolio is more concentrated in technology and international stocks, which can lead to higher volatility but also potential for greater returns.

Growth Info

Historically, the portfolio has demonstrated a strong Compound Annual Growth Rate (CAGR) of 13.77%, indicating robust growth over time. However, it also experienced a significant maximum drawdown of -32.6%, reflecting the inherent risk in a growth-oriented strategy. For context, a typical balanced portfolio might experience lower drawdowns but also lower growth rates. This performance highlights the high-risk, high-reward nature of the portfolio, suitable for investors with a higher risk tolerance and a long-term investment horizon.

Projection Info

Using Monte Carlo simulations, which utilize historical data to predict future outcomes, the portfolio exhibits a wide range of potential results. With 1,000 simulations, the 5th percentile shows a 66.02% return, while the median is at 465.52%, and the 67th percentile reaches 659.68%. This indicates a high degree of variability, common in growth-focused portfolios. It's important to note that these projections are based on historical data and do not guarantee future performance. Investors should consider these simulations as one of many tools to assess potential outcomes.

Asset classes Info

  • Stocks
    99%
  • Cash
    1%

The portfolio is almost entirely composed of stocks, with a negligible allocation to cash and other asset classes. This allocation indicates a strong commitment to growth, as equities typically offer higher returns over the long term compared to other asset classes like bonds or cash. However, the lack of diversification across asset classes can increase risk, particularly during market downturns. Investors might consider incorporating other asset classes to balance risk and enhance stability in the portfolio.

Sectors Info

  • Technology
    46%
  • Financials
    12%
  • Consumer Discretionary
    9%
  • Industrials
    7%
  • Telecommunications
    7%
  • Health Care
    7%
  • Consumer Staples
    4%
  • Basic Materials
    3%
  • Energy
    2%
  • Real Estate
    2%
  • Utilities
    2%

Sector allocation is heavily skewed towards technology, which comprises 46% of the portfolio. Other sectors like financial services and consumer cyclicals are present but less prominent. This concentration in technology can lead to higher volatility, especially in environments where interest rates rise or tech stocks face headwinds. While the tech sector has driven significant growth, diversifying into other sectors could help mitigate risk and stabilize returns, aligning with broader market benchmarks.

Regions Info

  • North America
    65%
  • Europe Developed
    15%
  • Asia Emerging
    6%
  • Japan
    6%
  • Asia Developed
    4%
  • Australasia
    2%
  • Africa/Middle East
    1%
  • Latin America
    1%

Geographically, the portfolio is predominantly weighted towards North America, representing 65.05% of the allocation. Europe Developed and Asia Emerging follow, but with significantly smaller shares. This geographic concentration can expose the portfolio to region-specific risks, such as economic downturns or regulatory changes. Increasing exposure to underrepresented regions could enhance diversification and reduce the impact of localized events, aligning the portfolio more closely with global benchmarks.

Redundant positions Info

  • Vanguard Total World Stock Index Fund ETF Shares
    Vanguard FTSE All-World ex-US Index Fund ETF Shares
    High correlation
  • Vanguard Information Technology Index Fund ETF Shares
    Vanguard Growth Index Fund ETF Shares
    High correlation

The portfolio contains highly correlated assets, particularly between the Vanguard Total World Stock Index Fund ETF Shares and the Vanguard FTSE All-World ex-US Index Fund ETF Shares, as well as between the Vanguard Information Technology Index Fund ETF Shares and the Vanguard Growth Index Fund ETF Shares. High correlation means these assets tend to move in the same direction, limiting diversification benefits. Reducing overlap by choosing less correlated assets could enhance risk management and improve the portfolio's resilience during downturns.

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 current configuration could benefit from optimization using the Efficient Frontier, which aims to achieve the best possible risk-return ratio. By adjusting the allocation among existing assets, the portfolio can potentially increase returns or reduce risk without changing the overall investment strategy. This approach focuses on maximizing efficiency rather than altering diversification or other investment goals, offering a path to enhance performance within the current asset framework.

Dividends Info

  • Vanguard FTSE All-World ex-US Index Fund ETF Shares 1.60%
  • Vanguard Information Technology Index Fund ETF Shares 0.50%
  • Vanguard Total World Stock Index Fund ETF Shares 1.90%
  • Vanguard Growth Index Fund ETF Shares 0.30%
  • Weighted yield (per year) 1.06%

The portfolio's total dividend yield stands at 1.06%, with the Vanguard Total World Stock Index Fund ETF Shares contributing the highest yield at 1.9%. While dividends can provide a steady income stream, this portfolio's focus is clearly on growth rather than income generation. For investors seeking regular income, increasing allocation to higher-yielding assets might be beneficial. However, for those prioritizing capital appreciation, the current yield aligns with the growth-oriented strategy.

Ongoing product costs Info

  • Vanguard FTSE All-World ex-US Index Fund ETF Shares 0.07%
  • Vanguard Information Technology Index Fund ETF Shares 0.10%
  • Vanguard Total World Stock Index Fund ETF Shares 0.07%
  • Vanguard Growth Index Fund ETF Shares 0.04%
  • Weighted costs total (per year) 0.07%

The portfolio benefits from impressively low costs, with a total expense ratio (TER) of 0.07%. This low-cost structure supports better long-term performance by minimizing the drag on returns. Compared to industry averages, these costs are highly competitive, allowing more of the portfolio's gains to be retained by the investor. Maintaining this cost efficiency is crucial, and investors should continue to monitor and compare fees to ensure cost-effectiveness remains a priority.

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