A growth-focused portfolio with high U.S. tech exposure and limited diversification
Report created on Jan 26, 2025Risk profile
5/7
Diversification profile
2/5
Positions
-
QQ Invesco QQQ Trust
QQQ - US46090E1038 50.00% -
VO Vanguard S&P 500 ETF
VOO - US9229083632 50.00%
The portfolio is evenly split between two ETFs: Invesco QQQ Trust and Vanguard S&P 500 ETF. This results in a concentrated asset allocation, with 100% exposure to stocks. Compared to a more diversified benchmark, this portfolio lacks exposure to bonds or international equities, which could provide additional stability. While the choice of ETFs suggests a focus on growth, the limited diversification could increase vulnerability to market downturns. To enhance diversification, consider adding other asset classes like bonds or international equities, which can help balance risk and return.
Growth
Historically, the portfolio has performed well, with a Compound Annual Growth Rate (CAGR) of 17.09%. This impressive growth outpaces many benchmarks, reflecting strong past performance. However, it also experienced a maximum drawdown of -30.82%, indicating significant volatility. While past performance provides some insights, it's essential to remember that it doesn't guarantee future results. To mitigate potential future drawdowns, consider diversifying into less volatile assets that can cushion the impact of market fluctuations.
Projection
The Monte Carlo simulation, which uses historical data to estimate future outcomes, shows a wide range of potential returns. With an annualized return of 18.84% across simulations, the median outcome projects substantial growth. However, the 5th percentile outcome highlights potential downside risks, emphasizing the importance of diversification. While simulations provide a helpful outlook, they rely on past data and can't predict future market conditions. To prepare for various scenarios, consider stress-testing the portfolio under different market conditions and adjusting allocations accordingly.
Asset classes
- Stocks 100%
The portfolio is concentrated entirely in stocks, lacking exposure to other asset classes like bonds or commodities. This singular focus on equities can drive growth but also increases risk, especially during market downturns. In comparison, a diversified benchmark would typically include a mix of asset classes to balance risk and reward. To achieve a more balanced risk profile, consider incorporating bonds or alternative investments, which can provide income and stability during volatile periods.
Sectors
- Technology 42%
- Consumer Discretionary 13%
- Telecommunications 12%
- Health Care 8%
- Financials 7%
- Industrials 6%
- Consumer Staples 6%
- Energy 2%
- Utilities 2%
- Basic Materials 2%
- Real Estate 1%
Technology dominates the sector allocation at 42%, followed by consumer cyclicals and communication services. This tech-heavy focus aligns with recent market trends but may lead to higher volatility, especially during interest rate hikes. Compared to a more balanced sector allocation, this portfolio is heavily skewed, potentially increasing sector-specific risks. To mitigate these risks, consider diversifying into underrepresented sectors like healthcare or utilities, which can offer stability and reduce reliance on tech performance.
Regions
- North America 99%
- Europe Developed 1%
The portfolio's geographic allocation is heavily concentrated in North America, with 99% exposure. This lack of international diversification can increase vulnerability to regional economic shifts. Compared to a global benchmark, which typically includes broader geographic exposure, this focus may limit opportunities in emerging markets. To enhance geographic diversification, consider adding international equities, which can provide exposure to different economic cycles and growth opportunities outside North America.
Market capitalization
- Mega-cap 50%
- Large-cap 35%
- Mid-cap 14%
With a significant allocation to mega and big-cap stocks, the portfolio is skewed towards larger companies. This focus on large-cap equities can offer stability and established growth, but it may limit exposure to the potential high returns of smaller companies. Compared to a more balanced market cap allocation, this portfolio may miss out on opportunities in mid and small-cap stocks. To capture a broader range of growth potential, consider diversifying across different market capitalizations, including medium and small-cap companies.
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 current portfolio could benefit from optimization using the Efficient Frontier, which seeks to achieve the best possible risk-return ratio. By adjusting the allocation between existing assets, the portfolio can potentially enhance returns for a given level of risk. This optimization doesn't necessarily mean adding new assets but rather reallocating the current ones more effectively. Regularly reviewing and adjusting the portfolio based on market conditions can help maintain an optimal balance between risk and return.
Dividends
- Invesco QQQ Trust 0.50%
- Vanguard S&P 500 ETF 1.20%
- Weighted yield (per year) 0.85%
The portfolio's dividend yield stands at 0.85%, reflecting a focus on growth over income. While dividends can provide a steady income stream, this portfolio prioritizes capital appreciation. Compared to income-focused portfolios, the yield is relatively low, which may not suit investors seeking regular income. If income is a goal, consider adding higher-yielding assets, such as dividend-focused ETFs or bonds, to enhance the portfolio's income-generating potential while maintaining growth opportunities.
Ongoing product costs
- Invesco QQQ Trust 0.20%
- Vanguard S&P 500 ETF 0.03%
- Weighted costs total (per year) 0.12%
The portfolio's Total Expense Ratio (TER) is 0.12%, which is impressively low and supports better long-term performance by minimizing costs. Low costs are crucial for maximizing returns, as they ensure that more of the investment growth remains in the portfolio. Compared to higher-cost portfolios, this allocation is well-aligned with best practices for cost efficiency. Maintaining this low-cost structure is beneficial, but it's also essential to ensure that the cost savings don't come at the expense of necessary diversification.
What next?
Ready to invest in this portfolio?
Select a broker that fits your needs and watch for low fees to maximize your returns.
Create your own report?
Join our community!
The information provided on this platform is for informational purposes only and should not be considered as financial or investment advice. Insightfolio does not provide investment advice, personalized recommendations, or guidance regarding the purchase, holding, or sale of financial assets. The tools and content are intended for educational purposes only and are not tailored to individual circumstances, financial needs, or objectives.
Insightfolio assumes no liability for the accuracy, completeness, or reliability of the information presented. Users are solely responsible for verifying the information and making independent decisions based on their own research and careful consideration. Use of the platform should not replace consultation with qualified financial professionals.
Investments involve risks. Users should be aware that the value of investments may fluctuate and that past performance is not an indicator of future results. Investment decisions should be based on personal financial goals, risk tolerance, and independent evaluation of relevant information.
Insightfolio does not endorse or guarantee the suitability of any particular financial product, security, or strategy. Any projections, forecasts, or hypothetical scenarios presented on the platform are for illustrative purposes only and are not guarantees of future outcomes.
By accessing the services, information, or content offered by Insightfolio, users acknowledge and agree to these terms of the disclaimer. If you do not agree to these terms, please do not use our platform.
Instrument logos provided by Elbstream.
Help us improve Insightfolio
Your feedback makes a difference! Share your thoughts in our quick survey. Take the survey