High-growth tech-focused portfolio with strong historic returns but limited diversification

Report created on Jan 4, 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 weighted towards ETFs, with the Vanguard S&P 500 ETF making up over half of the allocation. This concentration in a single asset, though a broad market index, limits diversification. While ETFs provide a diversified exposure to multiple stocks, the high allocation to a single ETF might not capture the full spectrum of market opportunities. Consider balancing the portfolio by integrating more diverse asset types, such as bonds or international equities, to reduce risk and enhance stability.

Growth Info

The portfolio has demonstrated impressive historic performance with a CAGR of 27.76%, significantly outperforming many benchmarks. However, it's important to note the maximum drawdown of -37.61%, indicating considerable volatility. While past performance is not indicative of future results, this history suggests the portfolio can achieve high returns but may also experience substantial downturns. To mitigate potential risks, consider strategies that can provide downside protection, such as incorporating more defensive assets or diversifying sector exposure.

Projection Info

Using Monte Carlo simulation, the portfolio's forward projections show a wide range of possible outcomes, with median returns suggesting substantial growth. Monte Carlo simulations use historical data to generate potential future scenarios, highlighting the uncertainty inherent in investing. While the median projection is promising, the variability underscores the importance of risk management. Regularly reassessing asset allocation and ensuring alignment with risk tolerance and investment goals is crucial to navigate potential market fluctuations effectively.

Asset classes Info

  • Stocks
    100%

The portfolio is overwhelmingly allocated to stocks, accounting for nearly 100% of the assets. This heavy reliance on equities enhances growth potential but also increases volatility and risk. Diversifying across different asset classes, such as bonds or real estate, can provide more stability and reduce susceptibility to market swings. Incorporating fixed income, for instance, could offer a buffer during equity downturns, helping to smooth out returns over time and align with a balanced risk profile.

Sectors Info

  • Technology
    48%
  • Financials
    9%
  • Consumer Discretionary
    9%
  • Health Care
    8%
  • Telecommunications
    8%
  • Industrials
    6%
  • Consumer Staples
    5%
  • Energy
    3%
  • Utilities
    2%
  • Basic Materials
    1%
  • Real Estate
    1%

Technology dominates the sector allocation, comprising nearly half of the portfolio. While this sector has driven significant growth, it also introduces heightened volatility, particularly during periods of regulatory scrutiny or tech market corrections. Expanding into underrepresented sectors like consumer defensive or utilities could mitigate sector-specific risks and provide a more balanced exposure. This diversification can help stabilize returns, especially during periods when tech stocks underperform due to broader economic shifts.

Regions Info

  • North America
    99%
  • Europe Developed
    1%

The portfolio is heavily concentrated in North America, with minimal exposure to other regions. This geographic concentration limits the benefits of global diversification, such as risk reduction and access to growth opportunities in emerging markets. By increasing exposure to international markets, the portfolio can better capture global economic growth and reduce dependency on the North American market. Consider adding funds that invest in Europe, Asia, or emerging markets to enhance geographic 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 concept, which seeks the best possible risk-return ratio. Currently, the portfolio's heavy reliance on high-growth tech stocks might not be the most efficient allocation. By adjusting the weightings among current assets, or adding new ones, the portfolio could achieve a more favorable balance between risk and return. This optimization involves finding a mix that maximizes return for a given risk level, enhancing the overall portfolio efficiency.

Dividends Info

  • Invesco NASDAQ 100 ETF 0.60%
  • Schwab U.S. Dividend Equity ETF 3.60%
  • Vanguard S&P 500 ETF 1.20%
  • Weighted yield (per year) 1.08%

The portfolio's dividend yield is relatively modest at 1.08%, with the Schwab U.S. Dividend Equity ETF contributing the most to income generation. Dividends can provide a steady income stream and enhance total returns, especially in volatile markets. For those prioritizing income, increasing exposure to high-dividend stocks or ETFs might be beneficial. However, it's crucial to balance this with the growth objectives, ensuring that the pursuit of income does not compromise the overall growth potential.

Ongoing product costs Info

  • Invesco NASDAQ 100 ETF 0.15%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.04%

The portfolio boasts impressively low costs, with a total TER of 0.04%, enhancing long-term performance by minimizing expense drag. Low fees are a significant advantage, compounding over time to boost net returns. Maintaining this cost efficiency is crucial, but also ensure that low fees do not come at the expense of diversification or performance. Regularly review the cost structure to identify any opportunities for further savings, such as switching to even lower-cost alternatives if available.

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