A balanced portfolio with a strong technology focus and limited geographic diversification

Report created on Dec 16, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

1/5
Single-Focused
Less diversification More diversification

Positions

This portfolio is comprised of a mix of ETFs and individual stocks, with a significant portion allocated to the Vanguard S&P 500 ETF, making up 38% of the total. The portfolio is heavily weighted towards stocks at 83.9%, with minimal exposure to bonds and a small cash component. This composition suggests a focus on growth with a moderate level of risk. Understanding the asset mix is crucial because it influences the portfolio’s risk-return profile. It's recommended to consider diversifying asset classes further to include more bonds or alternative investments, which can provide stability during market downturns.

Growth Info

Historically, the portfolio has performed well, with a compound annual growth rate (CAGR) of 16.18%. A hypothetical initial investment would have grown significantly over time, demonstrating strong past performance. However, the portfolio also experienced a maximum drawdown of -23.91%, indicating vulnerability during market downturns. While past performance can offer insights, it's not a guarantee of future results. Investors should remain cautious of over-relying on historical data, as market conditions can change. To mitigate potential drawdowns, consider adding defensive assets or diversifying further across sectors and geographies.

Projection Info

Using Monte Carlo simulations, this portfolio has been projected to have a variety of potential outcomes, with 1,000 simulations run to assess future performance. The median outcome suggests a substantial potential increase in value, while even the lower percentiles show positive growth. Monte Carlo simulations employ historical data to predict a range of possible future outcomes, but they are not foolproof. They assume past trends will continue, which may not always be the case. To best prepare for future market conditions, regularly review and adjust your portfolio based on the latest economic indicators and personal investment goals.

Asset classes Info

  • Stocks
    84%
  • Cash
    16%

The portfolio's allocation is predominantly in stocks, with minimal exposure to bonds and a small cash component. This heavy stock allocation can lead to high returns in bull markets but may also expose the portfolio to significant volatility. Diversification across asset classes is important to balance risk and return. Consider increasing bond exposure or exploring alternative investments to reduce volatility and provide a cushion during market downturns. A more balanced asset allocation can help achieve a more stable performance over time, aligning with long-term financial goals.

Sectors Info

  • Technology
    43%
  • Financials
    8%
  • Health Care
    7%
  • Consumer Discretionary
    7%
  • Telecommunications
    6%
  • Industrials
    5%
  • Consumer Staples
    3%
  • Energy
    2%
  • Utilities
    2%
  • Real Estate
    1%
  • Basic Materials
    1%

The technology sector dominates this portfolio, accounting for over 42% of the total allocation. While this can drive significant growth, it also concentrates risk in a single sector. Sector concentration can lead to increased volatility if that sector underperforms. Diversifying across more sectors can help mitigate this risk. Consider reallocating some assets to underrepresented sectors like healthcare or consumer defensives to achieve a more balanced sectoral exposure. This can help protect the portfolio from sector-specific downturns and provide more consistent returns.

Regions Info

  • North America
    84%

The portfolio is heavily concentrated in North America, with 83.6% of assets allocated there. This lack of geographic diversification means the portfolio is highly exposed to economic and political events in this region. Geographic diversification can help mitigate risks associated with regional downturns and provide exposure to growth opportunities in other parts of the world. Consider increasing exposure to developed and emerging markets outside North America to enhance diversification. This can help capture growth in other regions and reduce reliance on the North American economy.

Redundant positions Info

  • Invesco QQQ Trust
    Vanguard Growth Index Fund ETF Shares
    High correlation
  • Vanguard S&P 500 ETF
    Vanguard Total Stock Market Index Fund ETF Shares
    High correlation

The portfolio includes several highly correlated assets, such as the Invesco QQQ Trust and Vanguard Growth Index Fund ETF Shares. High correlation means these assets tend to move in the same direction, which can reduce diversification benefits. Diversification is crucial for managing risk, as it spreads investments across assets that do not move together. Consider reducing holdings in highly correlated assets and adding those with lower correlation to enhance diversification. This can help achieve a more balanced risk-return profile and improve the portfolio's resilience to market fluctuations.

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 to achieve a better risk-return ratio. Currently, the portfolio includes overlapping assets that do not contribute to diversification. By removing these and reallocating within the existing asset pool, the portfolio can potentially achieve higher returns with the same level of risk. Optimization focuses on finding the best risk-return balance, not necessarily increasing diversification. Consider working with a financial advisor to explore optimization strategies, ensuring the portfolio aligns with your risk tolerance and investment goals.

Dividends Info

  • Apple Inc 0.40%
  • Cisco Systems Inc 2.70%
  • Invesco QQQ Trust 0.60%
  • iShares® 0-3 Month Treasury Bond ETF 4.70%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.20%
  • Vanguard Growth Index Fund ETF Shares 0.50%
  • Weighted yield (per year) 1.80%

The portfolio's overall dividend yield is 1.8%, with contributions from various holdings like Cisco Systems Inc at 2.7% and the iShares 0-3 Month Treasury Bond ETF at 4.7%. Dividends can provide a steady income stream and enhance total returns. However, the current yield is relatively modest, indicating a focus on growth rather than income. If income generation is a goal, consider reallocating some assets towards higher-yielding stocks or dividend-focused funds. This can provide a more balanced approach, combining growth potential with income generation.

Ongoing product costs Info

  • Invesco QQQ Trust 0.20%
  • iShares® 0-3 Month Treasury Bond ETF 0.07%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Vanguard Growth Index Fund ETF Shares 0.04%
  • Weighted costs total (per year) 0.04%

The total expense ratio (TER) of the portfolio is 0.04%, indicating low costs associated with managing this portfolio. Lower costs can significantly impact long-term returns, as they reduce the drag on performance. It's important to regularly review and minimize costs wherever possible. Consider replacing higher-cost funds with similar, lower-cost alternatives to enhance overall returns. This can help maximize the portfolio's growth potential over time, allowing more of your investment to work for you.

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