High Growth Potential Portfolio with Tech Focus and Broad Diversification for Risk-Tolerant Investors

Report created on Jul 2, 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 is composed of five ETFs, with a strong focus on technology. The Vanguard Total Stock Market Index Fund ETF Shares take up 30% of the portfolio, providing broad market exposure. Two technology-focused ETFs, Vanguard Information Technology Index Fund ETF Shares and Invesco NASDAQ 100 ETF, together make up 35%, emphasizing the tech sector. The Vanguard Total International Stock Index Fund ETF Shares add a global dimension, comprising 20% of the portfolio. Lastly, the VanEck Semiconductor ETF, at 15%, further concentrates on a specific tech niche. This composition suggests a growth-oriented strategy, leveraging tech's potential while maintaining some diversification.

Growth Info

Historically, the portfolio has delivered a strong performance, with a CAGR of 16.87%. This indicates robust growth over time, albeit with a significant max drawdown of -32.7%, which highlights the high-risk nature of the portfolio. The portfolio's returns are concentrated, with just 18 days accounting for 90% of the returns. This concentration can lead to volatility, which is typical for growth-focused portfolios. The impressive historical performance suggests that the portfolio has capitalized well on market opportunities, especially in the tech sector, but investors should be prepared for potential fluctuations.

Projection Info

Using a Monte Carlo simulation with 1,000 iterations, the portfolio shows a wide range of potential outcomes. The 5th percentile projects a 119.43% return, while the median (50th percentile) is at 773.94%, and the 67th percentile reaches 1,166.59%. The high median and upper percentile values suggest strong potential for future growth, aligning with the portfolio's risk profile. Monte Carlo simulations provide a statistical range of possible outcomes, helping investors understand potential risks and rewards. The high annualized return of 19.46% across simulations indicates a promising outlook, though it's important to consider the inherent volatility.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily weighted towards stocks, comprising 99.54% of the total allocation. This high concentration in equities aligns with a growth-oriented investment strategy, aiming for capital appreciation. Minimal allocations to cash and other asset classes suggest a focus on maximizing returns rather than preserving capital. While stocks offer high return potential, they also come with increased risk. Investors should consider whether this level of exposure aligns with their risk tolerance. Diversifying into other asset classes, like bonds, could help balance risk, though the current allocation is consistent with a high-growth strategy.

Sectors Info

  • Technology
    54%
  • Financials
    8%
  • Consumer Discretionary
    7%
  • Industrials
    6%
  • Health Care
    6%
  • Telecommunications
    6%
  • Consumer Staples
    4%
  • Basic Materials
    2%
  • Energy
    2%
  • Utilities
    2%
  • Real Estate
    2%

The portfolio is heavily skewed towards the technology sector, making up 54.34% of the allocation. This is indicative of a strong belief in the tech industry's growth potential. Other sectors like Financial Services, Consumer Cyclicals, and Industrials have smaller allocations, providing some diversification. The heavy tech focus could lead to sector-specific risks, such as regulatory changes or market shifts. A more balanced sector allocation might reduce risk, but the current setup aligns with a high-growth strategy. Investors should be aware of the potential for tech sector volatility and consider their comfort with this level of concentration.

Regions Info

  • North America
    78%
  • Europe Developed
    9%
  • Asia Developed
    4%
  • Asia Emerging
    3%
  • Japan
    3%
  • Australasia
    1%
  • Africa/Middle East
    1%
  • Latin America
    1%

Geographically, the portfolio is predominantly invested in North America, with 77.93% of assets located there. This heavy weighting reflects confidence in the U.S. market's growth potential. Other regions, like Europe Developed and Asia Developed, have smaller allocations, adding some international exposure. This geographic concentration could pose risks if the North American market faces downturns. Diversifying further into other regions might mitigate such risks. However, the current allocation aligns with a strategy focused on tapping into the robust growth prospects of the U.S. market, which has historically been a strong performer.

Redundant positions Info

  • Invesco NASDAQ 100 ETF
    Vanguard Information Technology Index Fund ETF Shares
    High correlation

The portfolio shows high correlation among its tech-focused ETFs, particularly between the Invesco NASDAQ 100 ETF and the Vanguard Information Technology Index Fund ETF Shares. This high correlation suggests that these assets tend to move in the same direction, reducing diversification benefits. While tech's growth potential is appealing, having multiple highly correlated assets can increase portfolio volatility. Reducing overlap by diversifying into less correlated assets could enhance stability. However, given the portfolio's growth focus, the current setup is understandable, though investors should be mindful of the risks associated with high correlation.

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 optimization suggests focusing on reducing highly correlated assets before any further optimization. By doing so, diversification benefits can be enhanced, potentially reducing volatility. Moving along the efficient frontier can help achieve a more tailored risk-return balance. Investors seeking a riskier portfolio might increase exposure to high-growth sectors, while those wanting a more conservative approach could consider adding bonds or other less volatile assets. The efficient frontier helps visualize the trade-off between risk and return, guiding investors toward a portfolio mix that aligns with their risk appetite and financial goals.

Dividends Info

  • Invesco NASDAQ 100 ETF 0.60%
  • VanEck Semiconductor ETF 0.40%
  • Vanguard Information Technology Index Fund ETF Shares 0.60%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.20%
  • Vanguard Total International Stock Index Fund ETF Shares 3.00%
  • Weighted yield (per year) 1.23%

The portfolio's total dividend yield is 1.23%, with the Vanguard Total International Stock Index Fund ETF Shares contributing the highest yield at 3.0%. This yield is relatively modest, reflecting the portfolio's focus on growth rather than income. Dividend-paying stocks can provide a steady income stream, which may be appealing to some investors. However, the current yield aligns with a strategy prioritizing capital appreciation over income. Investors seeking higher income might consider reallocating to higher-yielding assets, but those focused on growth may find the current yield acceptable, given the portfolio's strong performance potential.

Ongoing product costs Info

  • Invesco NASDAQ 100 ETF 0.15%
  • VanEck Semiconductor ETF 0.35%
  • Vanguard Information Technology Index Fund ETF Shares 0.10%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.12%

The portfolio's total expense ratio (TER) is 0.12%, which is quite low, indicating cost-efficient management. The Vanguard Total Stock Market Index Fund ETF Shares have the lowest cost at 0.03%, contributing to the overall low TER. Keeping costs low is crucial for maximizing net returns, as high fees can erode investment gains over time. The current cost structure is favorable for investors, allowing more of the portfolio's returns to be retained. Maintaining a focus on low-cost investments can be beneficial for long-term growth, aligning with the portfolio's strategy of minimizing expenses while aiming for high returns.

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