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A growth-focused portfolio with high US exposure and technology sector concentration

Report created on Jan 6, 2025

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 ETFs, with nearly half in the Vanguard S&P 500 ETF. This allocation suggests a strong emphasis on large-cap US equities. While this can provide stability and growth, the limited exposure to other asset classes, such as bonds or international stocks, may restrict diversification. Typically, a balanced portfolio has a mix of stocks, bonds, and other assets. To enhance diversification, consider adding non-US equities or bonds, which can help mitigate risks associated with market volatility.

Growth Info

Historically, the portfolio has delivered impressive returns with a Compound Annual Growth Rate (CAGR) of 15.21%. This performance outpaces many benchmarks, indicating strong growth potential. However, the maximum drawdown of -33.27% highlights the volatility and risk associated with this portfolio. While past performance is not a guarantee of future results, understanding these metrics helps set realistic expectations. To potentially reduce drawdowns, consider diversifying into less volatile asset classes or sectors.

Projection Info

Forward projections using Monte Carlo simulations estimate an annualized return of 17.76%. These simulations use historical data to predict future outcomes, but it's important to note that they are not foolproof. The wide range of potential outcomes, from a 5th percentile return of 125.49% to a 67th percentile return of 1,025.68%, underscores the uncertainty inherent in investing. To navigate this uncertainty, regular portfolio reviews and adjustments based on changing market conditions are advisable.

Asset classes Info

  • Stocks
    100%

The portfolio is almost entirely composed of stocks, with a small cash component. This heavy stock allocation aligns with a growth-focused strategy, but it lacks the risk mitigation that comes from holding bonds or other asset classes. Diversification across asset classes can reduce risk and enhance stability, especially during market downturns. Consider incorporating fixed-income assets or alternative investments to balance the portfolio and provide a buffer against stock market volatility.

Sectors Info

  • Technology
    42%
  • Financials
    12%
  • Consumer Discretionary
    9%
  • Health Care
    9%
  • Telecommunications
    7%
  • Industrials
    7%
  • Consumer Staples
    6%
  • Energy
    4%
  • Utilities
    3%
  • Basic Materials
    2%
  • Real Estate
    1%

The portfolio is notably concentrated in the technology sector, which accounts for over 40% of the total allocation. While this sector has driven strong returns in recent years, it also introduces higher volatility, especially during periods of economic uncertainty. A more balanced sector allocation could reduce risk and improve resilience. Consider increasing exposure to sectors like healthcare or consumer staples, which may offer stability and growth potential in different market cycles.

Regions Info

  • North America
    99%
  • Europe Developed
    1%

Geographically, the portfolio is overwhelmingly focused on North America, with minimal exposure to other regions. This concentration limits the benefits of geographic diversification, which can mitigate regional risks and capture opportunities in emerging markets. While North America offers robust growth, diversifying into international markets can enhance returns and reduce risk. Consider adding ETFs or funds that focus on Europe, Asia, or emerging markets to broaden geographic exposure.

Redundant positions Info

  • Vanguard S&P 500 ETF
    Vanguard Growth Index Fund ETF Shares
    Vanguard Information Technology Index Fund ETF Shares
    High correlation

The portfolio's assets show high correlation, particularly among the Vanguard S&P 500 ETF, Vanguard Growth Index Fund ETF Shares, and Vanguard Information Technology Index Fund ETF Shares. High correlation means these assets tend to move together, which can limit diversification benefits during market downturns. To reduce portfolio risk, consider replacing some of these highly correlated assets with those that have lower correlation, such as international equities or bonds.

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.

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Before optimizing the portfolio on the Efficient Frontier, it's crucial to address the high correlation among current assets. The Efficient Frontier suggests the best risk-return trade-off, but it relies on a diverse set of assets. Reducing overlapping assets can enhance diversification, which is essential for achieving optimal efficiency. Consider reallocating funds to less correlated assets or sectors to improve the portfolio's risk-return profile.

Dividends Info

  • Vanguard Information Technology Index Fund ETF Shares 0.60%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Growth Index Fund ETF Shares 0.50%
  • Vanguard High Dividend Yield Index Fund ETF Shares 2.70%
  • Weighted yield (per year) 1.31%

The portfolio's dividend yield is 1.31%, supported mainly by the Vanguard High Dividend Yield Index Fund ETF Shares. While dividends provide a steady income stream, the overall yield is relatively low given the portfolio's growth focus. For investors seeking income, increasing the allocation to high-dividend stocks or funds may be beneficial. However, if the primary goal is capital appreciation, maintaining the current growth-focused allocation may be more appropriate.

Ongoing product costs Info

  • Vanguard Information Technology Index Fund ETF Shares 0.10%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Growth Index Fund ETF Shares 0.04%
  • Vanguard High Dividend Yield Index Fund ETF Shares 0.06%
  • Weighted costs total (per year) 0.05%

The portfolio benefits from low costs, with a total expense ratio (TER) of 0.05%. This is impressively low and supports better long-term performance by minimizing the drag on returns. Low costs are a significant advantage, especially in a growth-focused portfolio where maximizing returns is crucial. Continue to monitor and evaluate expense ratios, ensuring that any changes or additions to the portfolio maintain this cost efficiency.

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