Growth-Focused Portfolio with High Tech Exposure and Moderate Diversification for Risk-Tolerant Investors

Report created on Dec 3, 2024

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

The portfolio is heavily skewed towards technology, with the Technology Select Sector SPDR® Fund, Fidelity® MSCI Information Technology Index ETF, and NVIDIA Corporation comprising a significant portion. This concentration in tech suggests a focus on growth-oriented investments. While ETFs dominate the portfolio, there are also notable individual stock holdings like Microsoft and Apple. The mix of ETFs and stocks provides a balance between diversified exposure and targeted investments. To enhance diversification, consider balancing the tech-heavy focus with other sectors, ensuring a more resilient portfolio against sector-specific downturns.

Growth Info

Historically, this portfolio has delivered impressive results, with a compound annual growth rate (CAGR) of 23.02%. However, it has experienced significant volatility, evidenced by a maximum drawdown of -36.08%. This indicates that while the portfolio can achieve high returns, it is also susceptible to substantial losses. High volatility can be a concern for risk-averse investors. To mitigate this, one might consider adjusting the portfolio to include more stable, lower-risk assets. This could help reduce the impact of market downturns and provide a smoother performance trajectory over time.

Projection Info

Using a Monte Carlo simulation, the portfolio shows promising future potential. With 1,000 simulations, the median outcome projects an 825.41% increase in value. This method models various scenarios, offering insight into potential future performance under different market conditions. Despite the optimistic projections, the portfolio's risk level remains a crucial consideration. It's essential to understand that while the projections are favorable, they are not guaranteed. To align with personal risk tolerance, consider adjusting the asset allocation to balance potential returns with acceptable risk levels.

Asset classes Info

  • Stocks
    100%

The portfolio is overwhelmingly composed of stocks, with a negligible allocation to cash and bonds. This stock-heavy allocation is typical for growth-focused portfolios aiming for high returns. However, the lack of bonds and minimal cash holdings may expose the portfolio to higher volatility. Including bonds could provide stability and income, especially during market downturns. For those seeking to reduce risk, incorporating a mix of bonds might be beneficial. This adjustment can help cushion the portfolio against stock market fluctuations and provide a more balanced risk-return profile.

Sectors Info

  • Technology
    77%
  • Consumer Discretionary
    4%
  • Health Care
    4%
  • Telecommunications
    4%
  • Industrials
    4%
  • Financials
    3%
  • Consumer Staples
    2%
  • Energy
    1%
  • Basic Materials
    1%
  • Real Estate
    1%
  • Utilities
    1%

With over 76% invested in technology, the portfolio is significantly concentrated in this single sector. While tech has been a strong performer, this concentration increases vulnerability to sector-specific risks. Other sectors, like consumer cyclicals and healthcare, have minor representations but could offer diversification benefits. Diversifying across more sectors might reduce the portfolio's susceptibility to tech market volatility. By spreading investments across various sectors, the portfolio can potentially achieve more consistent performance, cushioning against downturns in any single industry.

Regions Info

  • North America
    96%
  • Asia Emerging
    3%

Geographically, the portfolio is predominantly focused on North America, with over 96% of assets allocated there. This regional concentration might limit exposure to growth opportunities in other parts of the world. While North American markets have performed well, diversifying into emerging markets or developed regions outside North America could offer additional growth potential and risk diversification. Expanding geographic exposure could enhance the portfolio's resilience against regional economic downturns and capitalize on global market opportunities.

Redundant positions Info

  • Vanguard S&P 500 ETF
    Invesco NASDAQ 100 ETF
    Schwab U.S. Broad Market ETF
    Schwab 1000 ETF
    SPDR® Portfolio S&P 500 Growth ETF
    Fidelity® MSCI Information Technology Index ETF
    Vanguard Total Stock Market Index Fund ETF Shares
    Technology Select Sector SPDR® Fund
    High correlation

A high degree of correlation exists among several assets in the portfolio, particularly those tracking major indices and tech-related ETFs. This correlation suggests that these assets tend to move in the same direction, providing limited diversification benefits. High correlation can amplify the impact of market movements on the portfolio. To improve diversification, consider reducing exposure to overlapping assets and introducing investments with low correlation to existing holdings. This strategy can help balance risk and enhance the portfolio's overall resilience.

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.

Before optimizing, focus on reducing overlapping, highly correlated assets that don't add diversification. By doing so, the portfolio can achieve a more efficient risk-return balance. Moving along the efficient frontier, one can adjust the risk level to either increase expected returns or reduce risk. A riskier portfolio might include more growth-oriented stocks, while a conservative one would add bonds or defensive stocks. The current portfolio's expected return is surpassed by the optimal portfolio's return, suggesting room for improvement through strategic reallocation.

Dividends Info

  • Apple Inc 0.40%
  • Fidelity® MSCI Information Technology Index ETF 0.60%
  • Microsoft Corporation 0.50%
  • Invesco Aerospace & Defense ETF 0.50%
  • Invesco NASDAQ 100 ETF 0.60%
  • Schwab U.S. Broad Market ETF 1.20%
  • Schwab U.S. Dividend Equity ETF 3.30%
  • Schwab 1000 ETF 1.50%
  • SPDR® Portfolio S&P 500 Growth ETF 0.60%
  • Taiwan Semiconductor Manufacturing 1.10%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.20%
  • Technology Select Sector SPDR® Fund 0.70%
  • Weighted yield (per year) 0.70%

The portfolio's dividend yield stands at 0.7%, reflecting its focus on growth rather than income generation. While some individual stocks and ETFs provide dividends, the overall yield is relatively low. For investors seeking income, this might not be sufficient. To increase dividend income, consider reallocating a portion of the portfolio to high-dividend stocks or ETFs. This adjustment can provide a steady income stream, complementing the growth potential of the existing holdings. Balancing growth and income can create a more versatile investment approach.

Ongoing product costs Info

  • Fidelity® MSCI Information Technology Index ETF 0.08%
  • Invesco Aerospace & Defense ETF 0.58%
  • Invesco NASDAQ 100 ETF 0.15%
  • Schwab U.S. Broad Market ETF 0.03%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • Schwab 1000 ETF 0.05%
  • SPDR® Portfolio S&P 500 Growth ETF 0.04%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Technology Select Sector SPDR® Fund 0.09%
  • Weighted costs total (per year) 0.06%

The portfolio's total expense ratio (TER) is 0.06%, indicating very low investment costs. This efficiency is beneficial for maximizing net returns, as lower costs can significantly impact long-term performance. While some ETFs have slightly higher expense ratios, the overall cost structure remains favorable. Keeping costs low is a smart investment principle, ensuring more of the portfolio's returns are retained. Continuously monitoring and managing investment costs can enhance the portfolio's performance, making it more effective in achieving financial goals over time.

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