High-Risk Growth Portfolio with Low Diversification and Technology Sector Dominance

Report created on Jul 13, 2024

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

The portfolio consists mainly of ETFs with a strong focus on growth, featuring a significant allocation to the Vanguard S&P 500 Growth Index Fund. It is heavily weighted towards stocks, with minimal exposure to bonds or other asset classes. This composition indicates a high-risk, high-reward strategy, suitable for those seeking aggressive growth. The lack of diversification, however, exposes the portfolio to significant volatility, as it's concentrated in a few specific funds and sectors. To mitigate risk, it's important to consider adding more diverse asset classes or funds to balance the portfolio.

Growth Info

Historically, the portfolio has demonstrated impressive performance with a compound annual growth rate (CAGR) of 17.45%. However, it has also experienced a substantial maximum drawdown of -33.92%, highlighting its vulnerability during market downturns. This performance suggests that while the portfolio can achieve high returns, it also carries significant risk. Investors should be prepared for periods of high volatility and potential losses. To maintain a balance between risk and reward, it may be beneficial to periodically review and adjust the portfolio's composition to align with changing market conditions and personal risk tolerance.

Projection Info

A Monte Carlo simulation, which uses random sampling to predict future outcomes, was conducted with 1,000 simulations. The results show a wide range of potential future values, with a 50th percentile end value of 694.83% and a high annualized return of 19.58%. The simulation indicates that while there is potential for substantial growth, there is also a possibility of significant variability in returns. This reinforces the importance of having a long-term investment horizon and being prepared for fluctuations. Regularly reviewing the portfolio's performance against personal financial goals can help ensure it remains on track.

Asset classes Info

  • Stocks
    100%

The portfolio is overwhelmingly composed of stocks, accounting for over 99% of the allocation, with negligible exposure to bonds, cash, or other assets. This heavy stock concentration aligns with a growth-focused strategy but increases exposure to market volatility. Diversifying asset classes can help reduce risk and provide more stability. Consider incorporating a mix of bonds and other asset classes to balance the portfolio and provide a buffer against stock market fluctuations. This approach can help achieve more consistent returns over time and protect against potential downturns.

Sectors Info

  • Technology
    55%
  • Consumer Discretionary
    10%
  • Industrials
    9%
  • Telecommunications
    6%
  • Financials
    5%
  • Energy
    5%
  • Health Care
    4%
  • Consumer Staples
    3%
  • Basic Materials
    3%
  • Real Estate
    1%

The portfolio is predominantly invested in the technology sector, which makes up over 54% of the allocation. While this sector has shown strong growth potential, it also introduces significant risk due to its susceptibility to market changes and technological disruptions. Other sectors like consumer cyclicals and industrials have smaller allocations, providing limited diversification. To reduce sector-specific risk, it's advisable to spread investments across a broader range of industries. This can help cushion the impact of adverse events in any single sector and contribute to a more balanced growth trajectory.

Regions Info

  • North America
    99%
  • Europe Developed
    1%

Geographically, the portfolio is heavily concentrated in North America, with over 98% of assets allocated there. This regional focus may limit exposure to growth opportunities in other parts of the world. While the North American market has been a strong performer, diversifying geographically can help capture growth in emerging and developed markets elsewhere. This approach can also provide a hedge against regional economic downturns. Consider exploring investment options in other regions to enhance diversification and potentially increase returns while mitigating the risks associated with regional concentration.

Dividends Info

  • Amplify Transformational Data Sharing ETF 0.80%
  • Invesco S&P 500 GARP ETF 1.30%
  • Vanguard Information Technology Index Fund ETF Shares 0.60%
  • Vanguard Mid-Cap Index Fund ETF Shares 1.80%
  • Vanguard S&P 500 Growth Index Fund ETF Shares 0.60%
  • Invesco S&P MidCap Momentum ETF 0.30%
  • Weighted yield (per year) 0.73%

The portfolio's dividend yield is relatively low at 0.73%, reflecting its focus on growth rather than income generation. While growth stocks can offer significant capital appreciation, they typically pay lower dividends compared to more stable, income-focused investments. For investors seeking regular income, it's important to recognize this limitation. To enhance income potential, consider incorporating dividend-paying stocks or funds into the portfolio. This can provide a steady cash flow while still allowing for capital growth. Balancing growth and income can help achieve a more well-rounded investment strategy.

Ongoing product costs Info

  • Amplify Transformational Data Sharing ETF 0.76%
  • Invesco S&P 500 GARP ETF 0.34%
  • Vanguard Information Technology Index Fund ETF Shares 0.10%
  • Vanguard Mid-Cap Index Fund ETF Shares 0.04%
  • Vanguard S&P 500 Growth Index Fund ETF Shares 0.10%
  • Invesco S&P MidCap Momentum ETF 0.34%
  • Weighted costs total (per year) 0.16%

The portfolio's total expense ratio (TER) is relatively low at 0.16%, indicating cost-effective management. This is beneficial for maximizing returns, as lower costs mean more of the investment's gains are retained. However, individual fund costs vary, with the Amplify Transformational Data Sharing ETF having a higher expense ratio of 0.76%. Keeping an eye on fund expenses is crucial, as they can erode returns over time. Consider evaluating the cost-effectiveness of each fund and exploring lower-cost alternatives if necessary. Maintaining a low-cost portfolio can significantly enhance long-term returns.

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