A tech-focused growth portfolio with concentrated U.S. exposure and high historical returns

Report created on Feb 1, 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 composed entirely of ETFs, with significant investments in technology and large-cap stocks. Notably, the Vanguard Information Technology Index Fund and Vanguard S&P 500 ETF each hold a 30% weighting, while the VanEck Morningstar Wide Moat ETF and Schwab U.S. Large-Cap Growth ETF each account for 20%. This composition shows a strong bias towards growth and large-cap stocks, with limited asset class diversification. While this aligns with a growth-focused strategy, it also exposes the portfolio to sector-specific risks, especially in technology.

Growth Info

Historically, the portfolio has delivered impressive returns, with a Compound Annual Growth Rate (CAGR) of 17.31%. Despite a maximum drawdown of -32.76%, the portfolio has shown resilience, recovering quickly after downturns. This performance is partly due to the robust growth of the technology sector and large-cap stocks in recent years. However, it's important to remember that past performance does not guarantee future results, and the portfolio's high returns come with increased volatility.

Projection Info

The forward projection using Monte Carlo simulations suggests a wide range of potential outcomes, with a median expected return of 743.7%. Monte Carlo simulations use historical data to predict future performance by running thousands of possible scenarios. While 998 out of 1,000 simulations show positive returns, it's crucial to acknowledge that these are hypothetical and based on historical trends. As such, they may not fully capture future market conditions or unforeseen events.

Asset classes Info

  • Stocks
    100%

The portfolio's asset allocation is heavily concentrated in stocks, with no exposure to other asset classes like bonds or real estate. This 100% stock allocation can lead to higher returns but also increases volatility. Compared to a more balanced benchmark, this lack of diversification could pose risks during market downturns. Diversifying into other asset classes could help mitigate these risks and provide more stable returns over time, especially for investors seeking a smoother ride.

Sectors Info

  • Technology
    53%
  • Health Care
    11%
  • Financials
    7%
  • Industrials
    7%
  • Consumer Discretionary
    7%
  • Telecommunications
    7%
  • Consumer Staples
    5%
  • Basic Materials
    2%
  • Energy
    1%
  • Utilities
    1%
  • Real Estate
    1%

Sector-wise, the portfolio is heavily weighted towards technology, which comprises 53% of the total allocation. This concentration can lead to significant returns during tech booms but also increases vulnerability to sector-specific downturns. Other sectors like healthcare and financial services are underrepresented, which limits diversification. A more balanced sector allocation could help reduce risk and provide a buffer against potential technology sector volatility.

Regions Info

  • North America
    99%
  • Europe Developed
    1%

Geographically, the portfolio is almost entirely focused on North America, with 99% of assets allocated there. This heavy U.S. concentration can be advantageous given the strength of the U.S. market but also exposes the portfolio to regional risks. Compared to global benchmarks, this lack of international diversification may limit potential growth opportunities in emerging markets. Considering a more global approach could enhance diversification and provide exposure to different economic cycles.

Market capitalization Info

  • Mega-cap
    44%
  • Large-cap
    31%
  • Mid-cap
    20%
  • Small-cap
    4%
  • Micro-cap
    1%

The portfolio's market capitalization is skewed towards mega and big-cap stocks, which make up 75% of the allocation. This focus on larger companies can provide stability and reliable returns but may miss out on the growth potential of small and mid-cap stocks. Including more small and mid-cap stocks could enhance diversification and capture different growth opportunities. Balancing market caps can also help reduce risk and improve the portfolio's overall performance.

Redundant positions Info

  • Vanguard S&P 500 ETF
    Vanguard Information Technology Index Fund ETF Shares
    Schwab U.S. Large-Cap Growth ETF
    High correlation

The portfolio's assets, particularly the Vanguard S&P 500 ETF, Vanguard Information Technology Index Fund, and Schwab U.S. Large-Cap Growth ETF, show high correlation. This means they tend to move in tandem, limiting diversification benefits. While correlated assets can boost returns in a rising market, they may also amplify losses during downturns. Reducing correlation by diversifying into less correlated assets could improve risk management and enhance the portfolio's 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.

The portfolio's current asset allocation could benefit from optimization using the Efficient Frontier concept, which aims to maximize returns for a given level of risk. However, the high correlation between assets suggests that diversification could be improved first. By adjusting asset weights and incorporating less correlated investments, the portfolio could achieve a more favorable risk-return balance. This optimization focuses on enhancing the current assets' allocation for better efficiency.

Dividends Info

  • VanEck Morningstar Wide Moat ETF 1.30%
  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • Vanguard Information Technology Index Fund ETF Shares 0.60%
  • Vanguard S&P 500 ETF 1.20%
  • Weighted yield (per year) 0.88%

The portfolio's dividend yield is relatively low at 0.88%, reflecting its growth-oriented focus. While dividends can provide a steady income stream, growth portfolios typically prioritize capital appreciation over income. For investors seeking income, this may not be ideal. However, reinvesting dividends can enhance long-term returns. If income is a priority, consider adding higher-yielding assets to balance growth and income needs.

Ongoing product costs Info

  • VanEck Morningstar Wide Moat ETF 0.47%
  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • Vanguard Information Technology Index Fund ETF Shares 0.10%
  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.14%

The portfolio's total expense ratio (TER) is 0.14%, which is commendably low and supports better long-term performance. Lower costs mean more of your returns stay in your pocket, compounding over time. This cost efficiency is a strength of the portfolio, as high fees can erode returns. Maintaining a low-cost structure while optimizing asset allocation can enhance the portfolio's overall efficiency and effectiveness.

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