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High Risk Low Diversification Portfolio Heavily Weighted in Technology and North American Growth 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
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Positions

The portfolio is heavily concentrated in ETFs, with allocations primarily focused on growth-oriented funds. The top positions are Vanguard Mega Cap Growth Index Fund ETF Shares and Invesco NASDAQ 100 ETF, accounting for a significant portion of the portfolio. This composition suggests a strong inclination towards large-cap growth stocks. While ETFs offer diversification within themselves, the portfolio as a whole lacks diversity across different asset classes, being almost exclusively invested in stocks. To improve the portfolio's resilience, consider incorporating other asset types like bonds or real estate to balance potential risks.

Growth Info

Historically, the portfolio has shown impressive performance with a CAGR of 16.34%. However, it has also experienced a significant maximum drawdown of -32.08%, indicating vulnerability during market downturns. The high returns are primarily driven by the concentrated exposure to growth stocks, which tend to perform well in bullish markets. While the past performance is promising, it's crucial to remember that it may not predict future results. To mitigate potential losses, consider diversifying the portfolio and reducing reliance on high-growth stocks, especially in volatile market conditions.

Projection Info

Using a Monte Carlo simulation with 1,000 iterations, the portfolio's future performance was analyzed. The simulation assumes a hypothetical initial investment and projects a wide range of potential outcomes. The median projection shows a portfolio value increase of 651.67%, with a 5th percentile of 115.33% and a 67th percentile of 935.56%. Nearly all scenarios resulted in positive returns, highlighting the growth potential. However, the wide variance in outcomes suggests the importance of diversification to manage risks. Consider balancing growth with stability by adding assets that provide consistent returns across different market conditions.

Asset classes Info

  • Stocks
    100%

The portfolio is overwhelmingly invested in stocks, accounting for nearly 100% of the allocation. This heavy reliance on a single asset class increases the portfolio's risk, especially during market downturns. While stocks offer significant growth potential, they can also lead to substantial volatility. To reduce risk, consider diversifying into other asset classes such as bonds or alternative investments. These can provide stability and reduce the portfolio's overall volatility, ensuring a more balanced approach that aligns with long-term financial goals.

Sectors Info

  • Technology
    51%
  • Consumer Discretionary
    12%
  • Telecommunications
    11%
  • Health Care
    7%
  • Financials
    7%
  • Industrials
    4%
  • Consumer Staples
    3%
  • Basic Materials
    1%
  • Energy
    1%
  • Real Estate
    1%
  • Utilities
    1%

The portfolio is heavily skewed towards the technology sector, which comprises over half of the total allocation. This concentration exposes the portfolio to sector-specific risks, such as regulatory changes or technological disruptions. While technology stocks have been strong performers, the lack of sector diversification can lead to increased volatility. Broadening the sector allocation to include more defensive sectors like healthcare or consumer staples can provide stability and reduce risk. A well-diversified sector allocation can help mitigate the impact of sector-specific downturns.

Regions Info

  • North America
    97%
  • Europe Developed
    1%

Geographically, the portfolio is predominantly focused on North America, with over 97% of assets allocated there. This concentration limits exposure to international markets and their growth opportunities. While North American markets have historically performed well, diversification into other regions can provide access to different economic cycles and reduce geopolitical risks. Consider expanding the geographic allocation to include emerging markets or developed regions outside North America. This approach can enhance diversification and potentially improve risk-adjusted returns by capturing global growth opportunities.

Redundant positions Info

  • Vanguard Information Technology Index Fund ETF Shares
    Schwab U.S. Large-Cap Growth ETF
    Vanguard Growth Index Fund ETF Shares
    Vanguard Russell 1000 Growth Index Fund ETF Shares
    SPDR® Portfolio S&P 500 Growth ETF
    Invesco NASDAQ 100 ETF
    Vanguard Total World Stock Index Fund ETF Shares
    Vanguard Total Stock Market Index Fund ETF Shares
    Vanguard ESG US Stock
    Vanguard Mega Cap Growth Index Fund ETF Shares
    SoFi Select 500
    Vanguard S&P 500 ETF
    Vanguard Russell 1000 Index Fund ETF Shares
    Vanguard Mega Cap Index Fund ETF Shares
    iShares Core S&P 500 ETF
    Vanguard S&P 500 Growth Index Fund ETF Shares
    High correlation

The portfolio exhibits high correlations among its assets, particularly within growth-focused ETFs. This correlation suggests that the assets tend to move in the same direction, limiting the diversification benefits. High correlations can increase portfolio risk, especially during market downturns when correlated assets may decline simultaneously. To enhance diversification, consider incorporating assets with lower correlations to the existing holdings. This strategy can reduce overall portfolio volatility and improve resilience against market fluctuations, providing a more balanced and diversified investment approach.

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.

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Before optimizing the portfolio, addressing the high correlation among assets is crucial, as it limits diversification benefits. Reducing overlap in highly correlated assets can enhance portfolio resilience. Moving along the efficient frontier can help achieve a riskier or more conservative portfolio. For a riskier approach, consider increasing exposure to high-growth sectors. Conversely, for a more conservative stance, incorporate assets like bonds or dividend-paying stocks. This strategy can improve risk-adjusted returns, aligning the portfolio with the investor's risk appetite and financial goals, ensuring a balanced and efficient investment strategy.

Dividends Info

  • Vanguard ESG US Stock 1.00%
  • iShares Core S&P 500 ETF 1.20%
  • Vanguard Mega Cap Index Fund ETF Shares 1.10%
  • Vanguard Mega Cap Growth Index Fund ETF Shares 0.40%
  • Invesco NASDAQ 100 ETF 0.60%
  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • SoFi Select 500 1.00%
  • SPDR® Portfolio S&P 500 Growth ETF 0.60%
  • Vanguard Information Technology Index Fund ETF Shares 0.60%
  • Vanguard Russell 1000 Index Fund ETF Shares 1.20%
  • Vanguard Russell 1000 Growth Index Fund ETF Shares 0.60%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard S&P 500 Growth Index Fund ETF Shares 0.60%
  • Vanguard Total World Stock Index Fund ETF Shares 1.80%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.20%
  • Vanguard Growth Index Fund ETF Shares 0.50%
  • Weighted yield (per year) 0.75%

The portfolio's dividend yield stands at 0.75%, indicating a focus on growth rather than income generation. While growth stocks can offer substantial capital appreciation, the low dividend yield may not suit investors seeking regular income. To increase dividend income, consider adding dividend-focused ETFs or stocks that offer higher yields. This adjustment can provide a steady income stream and reduce reliance on capital gains for returns. Balancing growth and income can create a more comprehensive investment strategy that caters to diverse financial goals.

Ongoing product costs Info

  • Vanguard ESG US Stock 0.09%
  • iShares Core S&P 500 ETF 0.03%
  • Vanguard Mega Cap Index Fund ETF Shares 0.07%
  • Vanguard Mega Cap Growth Index Fund ETF Shares 0.07%
  • Invesco NASDAQ 100 ETF 0.15%
  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • SoFi Select 500 0.05%
  • SPDR® Portfolio S&P 500 Growth ETF 0.04%
  • Vanguard Information Technology Index Fund ETF Shares 0.10%
  • Vanguard Russell 1000 Index Fund ETF Shares 0.08%
  • Vanguard Russell 1000 Growth Index Fund ETF Shares 0.08%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard S&P 500 Growth Index Fund ETF Shares 0.10%
  • Vanguard Total World Stock Index Fund ETF Shares 0.07%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Vanguard Growth Index Fund ETF Shares 0.04%
  • Weighted costs total (per year) 0.08%

The portfolio's total expense ratio (TER) is 0.08%, reflecting a low-cost approach, which is beneficial for long-term investors. Keeping costs low is crucial for maximizing net returns over time. However, it's essential to balance cost-efficiency with diversification and risk management. While low-cost ETFs are advantageous, ensure that the portfolio's composition aligns with financial goals and risk tolerance. Consider reviewing the cost versus benefit of each holding to ensure the portfolio remains cost-effective while achieving the desired investment objectives.

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