A growth-focused portfolio with high tech exposure and limited geographic diversification

Report created on Dec 31, 2024

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

This portfolio is heavily weighted towards ETFs and large-cap tech stocks, with a significant portion in Vanguard Total Stock Market Index Fund ETF. The composition leans towards growth, with a high concentration in a few individual stocks like Meta Platforms and NVIDIA. Compared to a typical balanced portfolio, this one lacks significant diversification across asset classes. This concentration could enhance returns during market upswings but may also increase volatility. Consider introducing more varied asset types, like bonds, to balance risk and potential returns.

Growth Info

Historically, this portfolio has shown impressive growth, with a Compound Annual Growth Rate (CAGR) of 27.41%. However, it also experienced a significant max drawdown of -41.91%, indicating high volatility. This performance suggests that while the portfolio has the potential for high returns, it also poses substantial risks during market downturns. To mitigate these risks, diversifying into less volatile investments could be beneficial. Remember, past performance is not indicative of future results, and maintaining a balanced approach is crucial.

Projection Info

Using Monte Carlo simulations, which assess potential future outcomes based on historical data, this portfolio shows a wide range of potential returns. The median outcome suggests substantial growth, but the 5th percentile indicates potential losses. While the simulations predict positive returns in most scenarios, the inherent uncertainty highlights the importance of diversification. Using these projections, consider adjusting your asset allocation to better manage potential risks and returns, keeping in mind that these simulations are not guarantees.

Asset classes Info

  • Stocks
    100%

The portfolio is almost entirely composed of stocks, with a negligible cash component. This lack of asset class diversification could lead to increased volatility, as stocks tend to fluctuate more than bonds or other asset types. A well-diversified portfolio typically includes a mix of asset classes to spread risk. Consider adding fixed-income securities or other asset types to achieve a more balanced risk-return profile, especially if you seek stability alongside growth.

Sectors Info

  • Technology
    38%
  • Telecommunications
    25%
  • Consumer Discretionary
    11%
  • Financials
    7%
  • Health Care
    7%
  • Industrials
    4%
  • Consumer Staples
    3%
  • Energy
    2%
  • Real Estate
    1%
  • Utilities
    1%
  • Basic Materials
    1%

Technology dominates the sector allocation, comprising over 37% of the portfolio, followed by Communication Services. This concentration aligns with growth but exposes the portfolio to sector-specific risks, such as regulatory changes or tech market downturns. While tech-heavy portfolios can yield high returns, they can also be more volatile. To mitigate sector-specific risks, consider diversifying into other sectors with growth potential, like healthcare or industrials, which could provide a buffer during tech sector fluctuations.

Regions Info

  • North America
    100%

Geographically, the portfolio is almost entirely concentrated in North America, with minimal exposure to other regions. This lack of geographic diversification can heighten vulnerability to region-specific economic changes or political events. A more globally diversified portfolio can reduce such risks and tap into growth opportunities in international markets. Consider increasing exposure to developed and emerging markets outside North America to enhance diversification and potentially improve risk-adjusted returns.

Redundant positions Info

  • Vanguard Total Stock Market Index Fund ETF Shares
    Vanguard S&P 500 ETF
    High correlation

The portfolio features highly correlated assets like the Vanguard Total Stock Market Index Fund ETF and Vanguard S&P 500 ETF. High correlation means these assets tend to move together, limiting diversification benefits. During market downturns, this can amplify losses. To improve diversification, consider replacing one of these with an asset that has a lower correlation to the rest of your portfolio, thereby reducing overall risk and potentially enhancing returns.

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 for risk and return using the Efficient Frontier, address the overlap of highly correlated assets. The Efficient Frontier helps identify the best possible risk-return ratio, but it assumes diversification. By reducing asset overlap and diversifying further, you can better position your portfolio for optimization. Once diversification is improved, use optimization techniques to fine-tune the balance between risk and return, maximizing your portfolio's efficiency.

Dividends Info

  • Apple Inc 0.40%
  • Alphabet Inc Class C 0.30%
  • Meta Platforms Inc. 0.30%
  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Weighted yield (per year) 0.70%

The portfolio's dividend yield is relatively low at 0.7%, reflecting its growth focus. Dividends can provide steady income and help cushion against market volatility. While growth stocks often reinvest earnings into the company rather than paying dividends, adding high-dividend stocks or ETFs could enhance income and provide stability. This approach is beneficial if you seek a balance between growth and income, particularly in volatile markets.

Ongoing product costs Info

  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Weighted costs total (per year) 0.02%

The portfolio's total expense ratio (TER) is impressively low at 0.02%, primarily due to the inclusion of cost-effective ETFs like the Vanguard S&P 500 ETF. Keeping costs low is a critical factor in enhancing long-term returns, as high fees can erode gains over time. This efficient cost structure is a positive aspect of the portfolio. Continue to prioritize low-cost options when considering new investments, ensuring that fees do not outweigh potential returns.

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