A tech-focused growth portfolio with high risk and limited geographic diversification

Report created on Dec 29, 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 weighted towards equities, with 99.82% invested in stocks and a small cash allocation. This structure is typical for a growth-focused portfolio, aiming for capital appreciation. However, the lack of diversification across asset classes could expose the portfolio to higher volatility. A balanced portfolio often includes bonds or alternative investments to mitigate risk. Consider incorporating other asset classes to enhance diversification and reduce potential volatility.

Growth Info

With a historical CAGR of 19.62%, the portfolio has delivered strong returns, outperforming many benchmarks. However, the maximum drawdown of -34.44% highlights significant vulnerability during market downturns. While past performance is promising, it's essential to remember that it doesn't guarantee future results. To manage risk, consider strategies that can cushion the portfolio against sharp declines, such as diversifying or using hedging techniques.

Projection Info

The Monte Carlo simulation, which uses historical data to project potential future outcomes, suggests an annualized return of 22.3% across simulations. This optimistic forecast, however, should be taken with caution as it relies on historical trends that might not repeat. The wide range of potential outcomes, from 113.49% to 1,656.25% growth, indicates high uncertainty. Regularly reviewing projections and adjusting the portfolio as needed can help align with your financial goals.

Asset classes Info

  • Stocks
    100%

The allocation is almost entirely in stocks, limiting diversification benefits. While equities offer growth potential, they also come with higher risk. A well-diversified portfolio typically includes a mix of asset classes like bonds, real estate, or commodities, which can provide stability during market fluctuations. Consider adding other asset classes to balance growth with risk management, potentially improving the portfolio's resilience.

Sectors Info

  • Technology
    50%
  • Financials
    11%
  • Consumer Discretionary
    8%
  • Health Care
    7%
  • Industrials
    6%
  • Telecommunications
    6%
  • Consumer Staples
    4%
  • Energy
    3%
  • Basic Materials
    2%
  • Utilities
    2%
  • Real Estate
    1%

The portfolio's sector allocation is heavily tilted towards technology, comprising over 50% of the holdings. This concentration can lead to high volatility, especially if the tech sector faces downturns. Other sectors like financial services and consumer cyclicals are present but underrepresented. Diversifying across more sectors can reduce sector-specific risks and provide a more stable return profile over time.

Regions Info

  • North America
    99%
  • Europe Developed
    1%

Geographic exposure is predominantly centered in North America, with over 99% of assets in the region. This concentration limits international diversification, which can help mitigate regional economic risks. Including more global assets could provide exposure to different economic cycles and growth opportunities. Consider broadening the geographic allocation to enhance diversification and reduce dependency on North American markets.

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 asset allocation may benefit from optimization using the Efficient Frontier, which seeks the best risk-return ratio. This involves adjusting the weights of existing assets to maximize returns for a given level of risk. While the portfolio is growth-oriented, optimizing could enhance performance without significantly altering risk exposure. Consider periodic reviews to ensure alignment with your risk tolerance and investment objectives.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.60%
  • Vanguard Information Technology Index Fund ETF Shares 0.60%
  • Vanguard S&P 500 ETF 1.20%
  • Weighted yield (per year) 1.06%

With a total yield of 1.06%, dividends provide a modest income stream. While growth portfolios typically focus on capital appreciation, dividends can offer stability during volatile periods. The Avantis U.S. Small Cap Value ETF contributes the highest yield at 1.6%. Consider maintaining a balance between growth and income to enhance overall returns, especially if market conditions shift towards income-generating assets.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Vanguard Information Technology Index Fund ETF Shares 0.10%
  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.07%

The portfolio's total expense ratio (TER) is impressively low at 0.07%, which supports better long-term performance by minimizing costs. Low fees are beneficial as they allow more of the returns to compound over time. This cost efficiency aligns well with best practices in portfolio management. Continue to monitor expense ratios and seek cost-effective investment options to maintain this advantage.

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