High Growth Low Diversity Portfolio with Strong Tech Focus and Moderate Risk Score

Report created on Jul 3, 2024

Risk profile

  • Secure
    Speculative

The risk profile, derived from past market volatility, reflects the level of risk the portfolio is exposed to. This assessment helps align your investments with your financial goals and comfort with market fluctuations.

Diversification profile

  • Focused
    Diversified

The diversification assessment evaluates the spread of investments across asset classes, regions, and sectors. This ensures a balanced mix, reducing risk and maximizing returns by not concentrating in any single area.

Positions

The portfolio is heavily weighted towards just two ETFs: Vanguard S&P 500 ETF and Vanguard Information Technology Index Fund ETF Shares. This composition indicates a strong focus on U.S. equities, particularly in the technology sector. While this setup can offer substantial growth potential, it lacks diversification, which could increase vulnerability to sector-specific downturns. To enhance resilience, consider adding more varied asset types or sectors. This would help balance the risk and potentially stabilize returns over time.

Growth Info

Historically, the portfolio has delivered impressive returns with a compound annual growth rate (CAGR) of 17.1%. However, it also experienced significant volatility, with a maximum drawdown of -32.91%. This suggests that while the portfolio can generate substantial gains, it is also susceptible to considerable losses during market downturns. To mitigate this risk, it might be wise to incorporate more defensive assets that can provide stability during volatile periods. This approach could help in smoothing out the performance over time.

Projection Info

Using a Monte Carlo simulation, which involves running numerous hypothetical scenarios to predict potential outcomes, the portfolio shows promising future growth. With a median return of 882.6% and an annualized return of 19.81%, the projections are optimistic. However, it's crucial to remember that these are just projections and not guarantees. To better align with these projections, maintaining a balance between growth and stability by diversifying holdings across different asset classes could be beneficial.

Asset classes Info

  • Stocks
    100%

The portfolio is almost entirely composed of stocks, with a negligible amount of cash. This high allocation to equities can drive significant growth but also increases exposure to market volatility. A more balanced approach could involve incorporating other asset classes, like bonds, to reduce risk. Diversifying asset classes can provide a buffer against market fluctuations and help preserve capital during downturns, making the portfolio more resilient.

Sectors Info

  • Technology
    60%
  • Financials
    8%
  • Health Care
    7%
  • Consumer Discretionary
    6%
  • Telecommunications
    5%
  • Industrials
    5%
  • Consumer Staples
    3%
  • Energy
    2%
  • Utilities
    2%
  • Real Estate
    1%
  • Basic Materials
    1%

The portfolio is predominantly invested in the technology sector, accounting for nearly 60%. While this sector has been a strong performer, the heavy concentration increases risk if the sector faces a downturn. A more balanced sector allocation could enhance stability. By spreading investments across various sectors, the portfolio can potentially benefit from different economic cycles and reduce the impact of a downturn in any single sector.

Regions Info

  • North America
    99%
  • Europe Developed
    1%

Geographically, the portfolio is overwhelmingly focused on North America, with over 99% of assets in this region. This lack of geographic diversification could expose the portfolio to region-specific risks. Expanding investments to include more international assets might help mitigate these risks and take advantage of growth opportunities in other regions. A more geographically diverse portfolio can also provide a hedge against U.S.-specific economic or political issues.

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 chart suggests that while the current setup offers high growth potential, there's room for improvement in diversification. By moving along the efficient frontier, one can achieve a riskier or more conservative portfolio. To do so, consider adjusting the asset allocation to include a broader range of asset classes and sectors. This approach can help balance risk and return, potentially leading to a more stable performance over time.

Dividends Info

  • Vanguard Information Technology Index Fund ETF Shares 0.60%
  • Vanguard S&P 500 ETF 1.20%
  • Weighted yield (per year) 0.96%

The portfolio offers a modest dividend yield of 0.96%, which can provide a steady income stream. However, the yield is relatively low compared to more income-focused portfolios. To enhance income potential, consider including dividend-focused investments. This approach can help generate regular income, which can be reinvested to compound returns or used to meet cash flow needs.

Ongoing product costs Info

  • Vanguard Information Technology Index Fund ETF Shares 0.10%
  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.06%

The portfolio benefits from low costs, with a total expense ratio (TER) of just 0.06%. This is advantageous as lower fees mean more of the returns stay in the portfolio. Keeping costs low is crucial for maximizing net returns over time. Maintaining this low-cost strategy is advisable, as it can significantly impact long-term performance. Regularly reviewing and comparing costs with other investment options can ensure continued cost efficiency.

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