A tech-heavy growth portfolio with low diversification and high risk exposure

Report created on Jan 23, 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 heavily invested in ETFs, with the Schwab U.S. Broad Market ETF holding the largest share at 39.38%. This is followed by the Schwab U.S. Dividend Equity ETF at 12.15%. The portfolio is also significantly weighted towards individual technology stocks like Alphabet Inc and NVIDIA Corporation. Compared to a typical balanced portfolio, this one is more concentrated in fewer asset types, increasing potential volatility. To enhance diversification, consider incorporating other asset classes such as bonds or international equities, which may help balance risk and reward.

Growth Info

Historically, the portfolio has performed impressively, with a Compound Annual Growth Rate (CAGR) of 19.94%. However, it has also experienced a maximum drawdown of -31.07%, indicating significant volatility. While past performance shows strong returns, it's essential to remember that historical data does not guarantee future results. Investors might want to prepare for potential downturns by ensuring they have a risk management strategy in place, such as diversifying or using stop-loss orders.

Projection Info

Forward projections using Monte Carlo simulations suggest a wide range of potential outcomes, with a median return of 1,621.8%. This simulation uses historical data to estimate future performance, but it's important to note that these are hypothetical scenarios and not predictions. The high variability in outcomes suggests significant uncertainty. Investors should be aware of this risk and consider strategies to mitigate it, such as adjusting allocations to less volatile assets if needed.

Asset classes Info

  • Stocks
    100%

The portfolio is composed entirely of stocks, offering no exposure to other asset classes like bonds or cash. This lack of diversification can lead to higher risk, as all investments are tied to equity market performance. Typically, a more diversified allocation might include bonds, which can provide stability during market downturns. Adding different asset classes could reduce volatility and improve the risk-return profile of the portfolio.

Sectors Info

  • Technology
    45%
  • Telecommunications
    10%
  • Financials
    10%
  • Health Care
    8%
  • Consumer Discretionary
    7%
  • Industrials
    6%
  • Consumer Staples
    5%
  • Energy
    3%
  • Consumer Discretionary
    3%
  • Real Estate
    1%
  • Utilities
    1%
  • Basic Materials
    1%

The portfolio is heavily concentrated in the technology sector, making up 45% of the total allocation. While this sector has seen significant growth, it is also prone to volatility, especially during economic shifts or interest rate changes. A portfolio heavily weighted in tech may experience larger fluctuations. To mitigate this risk, consider diversifying into other sectors, such as healthcare or consumer staples, which may offer more stability.

Regions Info

  • North America
    98%
  • Europe Developed
    1%
  • Asia Developed
    1%

Geographically, the portfolio is overwhelmingly focused on North America, with 98% of assets allocated there. This lack of international exposure limits diversification and increases vulnerability to regional economic downturns. By adding investments in Europe, Asia, or emerging markets, the portfolio could benefit from global growth opportunities and reduce its dependency on the North American market.

Market capitalization Info

  • Mega-cap
    41%
  • Large-cap
    35%
  • Mid-cap
    17%
  • Small-cap
    5%
  • Micro-cap
    1%

The portfolio is predominantly invested in mega and large-cap stocks, which make up 76% of the holdings. While these companies are typically more stable, they may offer less growth potential compared to mid or small-cap stocks. A more balanced approach across various market capitalizations could provide a blend of stability and growth, potentially enhancing returns while managing risk.

Redundant positions Info

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

Many assets within the portfolio are highly correlated, particularly the ETFs and funds that track similar indices. High correlation means these assets tend to move together, reducing diversification benefits. During market downturns, this can lead to increased risk. To improve diversification, consider replacing some of these correlated assets with those that have lower correlation to the existing holdings, thereby enhancing 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 could potentially be optimized for better risk-return efficiency using the Efficient Frontier approach, which aims to maximize returns for a given level of risk. However, before doing so, it's crucial to address the high correlation among current holdings. By reducing overlap and reallocating to less correlated assets, the portfolio could achieve a more favorable risk-return ratio and potentially higher expected returns.

Dividends Info

  • Fidelity Total Market Index Fund 0.20%
  • Alphabet Inc Class A 0.30%
  • Schwab U.S. Broad Market ETF 0.80%
  • Schwab U.S. Dividend Equity ETF 3.60%
  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • iShares Semiconductor ETF 0.50%
  • Vanguard Information Technology Index Fund ETF Shares 0.60%
  • Vanguard S&P 500 Growth Index Fund ETF Shares 0.30%
  • Vanguard Growth Index Fund ETF Shares 0.50%
  • Weighted yield (per year) 0.91%

The portfolio's dividend yield is relatively low at 0.91%, with the Schwab U.S. Dividend Equity ETF contributing the most at 3.60%. For growth-focused investors, dividends might not be a priority, but they can provide a steady income stream and cushion against market volatility. If income generation is a goal, increasing exposure to high-dividend assets could be beneficial.

Ongoing product costs Info

  • Fidelity Total Market Index Fund 0.02%
  • TECHNOLOGY PORTFOLIO TECHNOLOGY PORTFOLIO 0.64%
  • RETAILING PORTFOLIO RETAILING PORTFOLIO 0.66%
  • Schwab U.S. Broad Market ETF 0.03%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • iShares Semiconductor ETF 0.35%
  • Vanguard Information Technology Index Fund ETF Shares 0.10%
  • Vanguard S&P 500 Growth Index Fund ETF Shares 0.10%
  • Vanguard Growth Index Fund ETF Shares 0.04%
  • Weighted costs total (per year) 0.10%

The portfolio's total expense ratio (TER) is quite low at 0.10%, which is advantageous for long-term returns. Lower costs mean more of your money is working for you rather than going towards fees. This is a strong point for the portfolio, and maintaining a focus on keeping costs low will continue to support better performance over time.

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