Concentrated US-focused portfolio with tech-heavy exposure and low diversification

Report created on Mar 6, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

The portfolio is heavily concentrated, with 80% in the Vanguard S&P 500 ETF and 20% in the Invesco NASDAQ 100 ETF. This structure means the portfolio is predominantly exposed to large-cap US stocks, which can provide stability and growth but limits diversification. Compared to a typical balanced portfolio, which might include a mix of stocks, bonds, and international assets, this portfolio is narrowly focused. To enhance diversification, consider incorporating other asset classes like bonds or international equities, which can help mitigate risk and provide more balanced returns over time.

Growth Info

Historically, the portfolio has performed well, with a Compound Annual Growth Rate (CAGR) of 14.65%. This impressive growth can be attributed to the strong performance of US large-cap stocks, particularly in the technology sector. However, the maximum drawdown of -26.46% indicates significant volatility during market downturns. Comparing this to benchmarks like the S&P 500 can help gauge relative performance. It's important to remember that past performance does not guarantee future results. Diversifying into less volatile assets could help reduce drawdowns in the future.

Projection Info

Monte Carlo simulations project potential future outcomes by analyzing historical data. With 1,000 simulations, the portfolio's annualized return is 15.92%, and 993 simulations show positive returns. However, the 5th percentile result of 86.8% indicates potential risk. While these simulations provide a range of possibilities, they rely on past data, which may not reflect future market conditions. To manage risk, consider adjusting the portfolio to include more conservative investments, which could provide stability in uncertain markets.

Asset classes Info

  • Stocks
    100%

The portfolio is 100% invested in stocks, lacking diversification across asset classes. This concentration can lead to higher volatility and risk, particularly during market downturns. In comparison, balanced portfolios typically include a mix of stocks, bonds, and other assets. Introducing bonds or alternative investments could help reduce risk and provide more stable returns. Diversifying across asset classes can also improve the portfolio's resilience to economic changes and market volatility.

Sectors Info

  • Technology
    37%
  • Consumer Discretionary
    12%
  • Telecommunications
    11%
  • Financials
    11%
  • Health Care
    9%
  • Industrials
    6%
  • Consumer Staples
    6%
  • Energy
    3%
  • Utilities
    2%
  • Real Estate
    2%
  • Basic Materials
    2%

The portfolio is heavily weighted towards the technology sector, which comprises 37% of the total allocation. While this has driven strong returns, it also increases exposure to sector-specific risks, such as regulatory changes or technological disruptions. Other sectors like consumer cyclicals, communication services, and financial services have smaller allocations. To mitigate sector-specific risks, consider rebalancing to include a broader range of sectors. This can help smooth out returns and reduce vulnerability to sector volatility.

Regions Info

  • North America
    99%
  • Europe Developed
    1%

With 99% of the portfolio concentrated in North America, geographic diversification is minimal. This heavy reliance on the US market exposes the portfolio to regional risks, such as economic downturns or political instability. A more diversified geographic allocation, including emerging markets and developed regions outside North America, could enhance portfolio resilience. By spreading investments across different regions, you can potentially capture growth opportunities and reduce the impact of regional market fluctuations.

Market capitalization Info

  • Mega-cap
    48%
  • Large-cap
    35%
  • Mid-cap
    16%

The portfolio is primarily invested in mega and big-cap stocks, with 48% and 35% allocations, respectively. This focus on large companies can provide stability and consistent returns, but it limits exposure to the growth potential of medium and small-cap stocks. Including smaller companies in the portfolio may offer higher growth opportunities, albeit with increased volatility. Balancing investments across different market capitalizations can help capture a broader range of growth prospects and improve overall diversification.

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 could potentially be optimized using the Efficient Frontier, which helps find the best risk-return ratio for a given set of assets. Currently, the portfolio's concentration in large-cap US stocks may not be fully optimized for risk-adjusted returns. Adjusting allocations within existing assets or incorporating new ones could enhance efficiency. Remember, optimization focuses on improving the risk-return profile, not necessarily diversification. Regularly reassessing the portfolio's composition can ensure it remains aligned with your financial goals.

Dividends Info

  • Invesco NASDAQ 100 ETF 0.60%
  • Vanguard S&P 500 ETF 1.20%
  • Weighted yield (per year) 1.08%

The portfolio's total dividend yield is 1.08%, with contributions from the Vanguard S&P 500 ETF and the Invesco NASDAQ 100 ETF. While dividends provide a steady income stream, this yield is relatively low compared to more income-focused portfolios. For investors seeking higher income, consider incorporating dividend-paying stocks or income-generating assets like bonds. Balancing growth and income investments can help achieve a more stable and diversified portfolio, catering to both capital appreciation and income needs.

Ongoing product costs Info

  • Invesco NASDAQ 100 ETF 0.15%
  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.05%

The portfolio's total expense ratio (TER) is impressively low at 0.05%, reflecting the cost-effectiveness of the chosen ETFs. Lower costs contribute positively to long-term returns, as they minimize the drag on performance. This cost efficiency aligns with best practices and is a strong aspect of the portfolio. To maintain cost-effectiveness, continue to monitor and compare expense ratios when considering new investments. Keeping costs low is a key strategy for maximizing net returns over time.

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