A tech-heavy growth-focused portfolio with low diversification and high U.S. market exposure

Report created on Jan 28, 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 concentrated in three ETFs: Vanguard S&P 500 ETF (40%), Invesco NASDAQ 100 ETF (30%), and Schwab U.S. Large-Cap Growth ETF (30%). This composition leans towards large-cap U.S. equities, reflecting a growth-oriented strategy. Compared to a balanced benchmark, this portfolio lacks diversification across asset classes and regions, focusing primarily on U.S. equities. To enhance diversification, consider including different asset classes such as bonds or international equities. This shift can help mitigate risks associated with overexposure to a single market or economic sector.

Growth Info

Historically, this portfolio has shown a strong CAGR of 16.20%, outperforming many traditional benchmarks. However, it experienced a significant max drawdown of -30.41%, highlighting its vulnerability during market downturns. While the high returns are attractive, the associated volatility may not suit all investors. To manage this risk, consider diversifying into less volatile assets while maintaining the growth potential. Remember, past performance does not guarantee future results, and it's crucial to balance potential returns with acceptable risk levels.

Projection Info

The Monte Carlo simulation, which uses historical data to predict future performance, suggests an optimistic outlook with an annualized return of 17.53%. However, it's crucial to note the limitations of such projections as they are based on historical data and assumptions. The simulation shows a high probability of positive returns, but investors should remain cautious of the inherent uncertainties. To prepare for various market scenarios, consider maintaining a flexible strategy that allows for adjustments based on changing market conditions.

Asset classes Info

  • Stocks
    100%

This portfolio is entirely invested in stocks, lacking exposure to other asset classes like bonds or real estate. Such a singular focus can increase vulnerability to stock market volatility. Diversifying across asset classes can help stabilize returns and provide a cushion during equity market downturns. Including asset classes with different risk-return profiles can enhance overall portfolio resilience. Consider introducing fixed-income securities or alternative investments to achieve a more balanced risk exposure.

Sectors Info

  • Technology
    44%
  • Consumer Discretionary
    13%
  • Telecommunications
    12%
  • Health Care
    9%
  • Financials
    7%
  • Industrials
    5%
  • Consumer Staples
    4%
  • Energy
    2%
  • Utilities
    2%
  • Basic Materials
    2%
  • Real Estate
    1%

The portfolio is heavily weighted towards the technology sector at 44%, followed by consumer cyclicals and communication services. This concentration indicates a reliance on tech-driven growth, which can lead to higher volatility, especially during periods of economic uncertainty or interest rate hikes. Balancing sector allocation can reduce sector-specific risks. Consider diversifying into sectors less correlated with technology, such as healthcare or utilities, to create a more stable investment environment.

Regions Info

  • North America
    99%
  • Europe Developed
    1%

With 99% of the portfolio allocated to North America, geographic diversification is minimal. This can expose the portfolio to risks specific to the U.S. economy, such as political changes or economic slowdowns. Expanding geographic exposure can provide stability and access to growth opportunities in other regions. Consider reallocating a portion of the investment to international markets, including emerging economies, to capture diverse growth prospects and reduce dependency on a single region.

Market capitalization Info

  • Mega-cap
    55%
  • Large-cap
    31%
  • Mid-cap
    13%
  • Small-cap
    1%

The portfolio is predominantly invested in mega (55%) and big (31%) cap stocks, with minimal exposure to medium and small caps. While large-cap stocks offer stability, they may limit growth potential compared to smaller companies. Balancing market capitalization exposure can enhance diversification and capture different growth dynamics. Consider increasing allocations to medium and small-cap stocks to tap into potentially higher growth opportunities, albeit with increased volatility.

Redundant positions Info

  • Invesco NASDAQ 100 ETF
    Schwab U.S. Large-Cap Growth ETF
    High correlation

The portfolio's assets, particularly the Invesco NASDAQ 100 ETF and Schwab U.S. Large-Cap Growth ETF, are highly correlated, reducing diversification benefits. High correlation means these assets tend to move together, which can amplify risks during market downturns. To enhance diversification, consider replacing some highly correlated assets with those exhibiting lower correlation. This strategy can help reduce portfolio volatility and improve overall risk-adjusted returns.

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.

Although the portfolio seeks growth, its current structure may not be on the Efficient Frontier, which represents the best risk-return balance. By adjusting allocations among existing assets, the portfolio can potentially achieve a more favorable risk-return ratio. Consider reallocating to optimize the portfolio's position on the Efficient Frontier. This involves analyzing current assets and their correlations to enhance efficiency without necessarily diversifying into new asset classes.

Dividends Info

  • Invesco NASDAQ 100 ETF 0.60%
  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • Vanguard S&P 500 ETF 1.20%
  • Weighted yield (per year) 0.78%

The total dividend yield of the portfolio is 0.78%, with the Vanguard S&P 500 ETF contributing the highest yield at 1.20%. While dividends provide a steady income stream, this portfolio's yield is relatively low, reflecting its growth focus. For investors seeking income, consider incorporating higher-yielding assets. Balancing growth and income can provide a more comprehensive investment approach, catering to both capital appreciation and cash flow needs.

Ongoing product costs Info

  • Invesco NASDAQ 100 ETF 0.15%
  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • 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%, with individual ETF costs ranging from 0.03% to 0.15%. Low costs are beneficial for long-term performance, as they reduce the drag on returns. Maintaining a cost-efficient portfolio is crucial, especially in a growth-focused strategy where compounding can significantly impact outcomes. Continue monitoring and optimizing costs to ensure the portfolio remains competitive and aligned with investment goals.

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