Growth-focused portfolio with a strong tech tilt and limited geographic diversification

Report created on Feb 19, 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 a significant 30% each in the Vanguard Information Technology Index Fund ETF and the Vanguard S&P 500 ETF. Additionally, 20% is invested in the Vanguard Growth Index Fund ETF. The remaining 20% is allocated to individual stocks, Amazon and Alphabet. Compared to a typical balanced portfolio, this structure leans heavily towards equities, which aligns with a growth-oriented strategy. While this can enhance returns, it may also increase volatility. Consider diversifying asset types, such as adding bonds or international equities, to balance risk.

Growth Info

Historically, the portfolio has exhibited strong performance with a Compound Annual Growth Rate (CAGR) of 19.45%. This impressive growth suggests effective asset selection and market timing. However, the maximum drawdown of -36.50% highlights the potential for significant losses during market downturns. Comparing this to benchmarks like the S&P 500, which has a lower historical drawdown, indicates higher risk. To mitigate this, consider incorporating more defensive assets that can cushion against severe market dips.

Projection Info

The Monte Carlo simulation, which uses historical data to forecast future outcomes, shows a wide range of potential returns. With 1,000 simulations, the median (50th percentile) projection is a 1,202.5% increase, while the 5th percentile is 166.5%. This illustrates the potential for both high returns and substantial risk. While simulations offer useful insights, remember they can't predict future market conditions. Consider using these projections to evaluate whether the potential high returns align with your risk tolerance.

Asset classes Info

  • Stocks
    100%

The portfolio is entirely composed of stocks, which limits diversification. A more balanced allocation across asset classes, such as including bonds or real estate, could reduce risk and enhance stability. Compared to a diversified benchmark, this portfolio is more susceptible to equity market fluctuations. To improve resilience, consider incorporating non-correlated asset classes that can provide returns even when equities underperform.

Sectors Info

  • Technology
    50%
  • Consumer Discretionary
    17%
  • Telecommunications
    16%
  • Financials
    5%
  • Health Care
    4%
  • Industrials
    3%
  • Consumer Staples
    2%
  • Energy
    1%
  • Real Estate
    1%
  • Utilities
    1%
  • Basic Materials
    1%

The sector allocation is heavily tilted towards technology, comprising 50% of the portfolio. This concentration can lead to higher volatility, especially during periods of tech sector downturns. Other sectors like consumer cyclicals and communication services are also represented but to a lesser extent. To reduce sector-specific risks, consider rebalancing to include more defensive sectors like healthcare or utilities, which can provide stability during economic downturns.

Regions Info

  • North America
    100%

With 100% of assets allocated to North America, the portfolio lacks geographic diversification. This concentration exposes it to regional economic risks, such as U.S. market downturns. Compared to global benchmarks, this is a notable underexposure to international markets. To enhance diversification, consider adding international equities or funds, which can offer growth opportunities in emerging markets and reduce reliance on the U.S. economy.

Market capitalization Info

  • Mega-cap
    62%
  • Large-cap
    23%
  • Mid-cap
    11%
  • Small-cap
    2%
  • Micro-cap
    1%

The portfolio's market capitalization is predominantly in mega-cap stocks, making up 62% of the allocation. This focus on large-cap companies typically offers stability but may limit growth potential compared to smaller-cap stocks. The minimal exposure to small and micro-cap stocks suggests missed opportunities for higher returns. To capture growth potential, consider increasing allocations to mid and small-cap stocks, which can offer higher returns despite increased volatility.

Redundant positions Info

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

The portfolio includes highly correlated assets, particularly among the ETFs. This correlation means these assets tend to move in tandem, reducing the diversification benefits. In market downturns, this can lead to amplified losses. To enhance diversification, consider replacing some correlated ETFs with others that have lower correlation, thereby spreading risk more effectively and potentially improving 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.

Using the Efficient Frontier, the portfolio can be optimized by adjusting asset weights to achieve the best possible risk-return ratio. However, the current high correlation between assets limits this optimization potential. Before pursuing optimization, focus on diversifying the portfolio by introducing non-correlated assets. This will create a more efficient portfolio, potentially offering improved returns for the same level of risk.

Dividends Info

  • Alphabet Inc Class C 0.30%
  • Vanguard Information Technology Index Fund ETF Shares 0.60%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Growth Index Fund ETF Shares 0.40%
  • Weighted yield (per year) 0.65%

With a total dividend yield of 0.65%, the portfolio's focus is clearly on growth rather than income. This low yield is typical for growth-oriented portfolios, where reinvestment of earnings is prioritized over dividend payouts. For investors seeking income, consider adding higher-dividend stocks or funds, which can provide regular income and add a defensive element to the portfolio, balancing the growth focus.

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%
  • Weighted costs total (per year) 0.05%

The portfolio's total expense ratio (TER) is impressively low at 0.05%, thanks to the inclusion of cost-effective Vanguard ETFs. Low costs are crucial for enhancing long-term returns, as they reduce the drag on performance. Compared to industry averages, this is a strong cost structure. Continue monitoring fund expenses to ensure they remain competitive, and consider replacing any higher-cost funds with lower-cost alternatives if they arise.

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