High Risk Low Diversity Portfolio with Heavy Tech Focus and Strong Historic Performance

Report created on Dec 3, 2024

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 in ETFs, with the Vanguard Information Technology Index Fund ETF Shares making up a significant portion. This composition indicates a strong preference for technology and growth-oriented investments. While ETFs provide diversification within themselves, the overall portfolio lacks diversity due to its heavy concentration in a single sector. A more balanced portfolio could reduce risk and improve stability. Consider diversifying into different sectors and asset classes to spread risk and enhance potential returns across various market conditions.

Growth Info

Historically, the portfolio has performed exceptionally well, with a CAGR of 23.74%. This impressive growth rate indicates a high potential for returns, but it's important to acknowledge the associated risks. The maximum drawdown of -55.3% highlights the volatility and potential for significant losses. This performance suggests that while the portfolio can generate substantial returns, it requires a steady risk appetite. To mitigate potential downturns, consider incorporating more stable investments that can provide a buffer during market fluctuations.

Projection Info

A Monte Carlo simulation, which uses random sampling to predict future outcomes, was conducted with 1,000 simulations. The results show a wide range of potential outcomes, with an annualized return of 24.24%. The 5th percentile indicates a potential loss, while the 67th percentile suggests significant gains. This projection highlights the portfolio's high-risk, high-reward nature. To maximize the chances of achieving desired outcomes, consider adjusting the risk level by diversifying investments and aligning them with long-term financial goals.

Asset classes Info

  • Stocks
    100%

The portfolio is overwhelmingly composed of stocks, accounting for over 99% of the total allocation. This heavy reliance on equities suggests a high-risk profile, as stocks are generally more volatile than other asset classes like bonds or real estate. While stocks offer the potential for high returns, they also come with increased risk, particularly during market downturns. To create a more balanced portfolio, consider incorporating other asset classes to reduce risk and provide more stable returns over time.

Sectors Info

  • Technology
    55%
  • Consumer Discretionary
    24%
  • Telecommunications
    6%
  • Health Care
    4%
  • Financials
    3%
  • Industrials
    2%
  • Consumer Staples
    2%
  • Energy
    1%
  • Utilities
    1%
  • Basic Materials
    1%
  • Real Estate
    1%

The portfolio is predominantly focused on the technology sector, which comprises over 55% of the total allocation. This significant concentration in a single sector increases the portfolio's exposure to sector-specific risks and market volatility. While technology has been a strong performer historically, it's essential to diversify across different sectors to mitigate potential downturns. Consider reallocating some investments into sectors such as healthcare, consumer goods, or financial services to achieve a more balanced and resilient portfolio.

Regions Info

  • North America
    99%
  • Europe Developed
    1%

The geographic composition of the portfolio is heavily skewed towards North America, with over 99% of assets allocated to this region. This concentration exposes the portfolio to regional risks and limits the potential benefits of global diversification. While North American markets have performed well, diversifying into international markets can provide exposure to different economic cycles and growth opportunities. Consider expanding the geographic allocation to include more developed and emerging markets for a more balanced and globally diversified portfolio.

Redundant positions Info

  • Invesco QQQ Trust
    Vanguard Information Technology Index Fund ETF Shares
    Vanguard Mega Cap Growth Index Fund ETF Shares
    High correlation
  • Vanguard S&P 500 ETF
    Vanguard Total Stock Market Index Fund ETF Shares
    High correlation

The portfolio contains several highly correlated assets, particularly within the technology sector. This correlation means that these assets tend to move in the same direction, reducing the diversification benefits. While correlated assets can amplify gains during market upswings, they also increase the risk of significant losses during downturns. To enhance diversification, consider reducing exposure to highly correlated assets and incorporating investments with lower correlations to achieve a more balanced risk-return profile.

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 optimization potential lies in reducing overlap among highly correlated assets to enhance diversification. Before optimizing, focus on eliminating redundant positions that don't contribute to diversification benefits. To shift towards a riskier or more conservative profile, consider moving along the efficient frontier. This involves adjusting the asset allocation to balance risk and return according to your investment goals. Achieving optimal diversification can improve the portfolio's risk-adjusted returns and provide a more stable investment experience.

Dividends Info

  • Vanguard Mega Cap Growth Index Fund ETF Shares 0.40%
  • Invesco QQQ Trust 0.60%
  • Vanguard Consumer Discretionary Index Fund ETF Shares 0.70%
  • Vanguard Information Technology Index Fund ETF Shares 0.60%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.20%
  • Weighted yield (per year) 0.61%

The portfolio's dividend yield is relatively low at 0.61%, reflecting its focus on growth-oriented investments. While high-growth stocks and ETFs can offer substantial capital appreciation, they often pay lower dividends. For investors seeking income, this portfolio may not be ideal. To increase dividend income, consider incorporating dividend-paying stocks or funds with higher yields. This approach can provide a more consistent income stream while balancing the growth potential of the portfolio.

Ongoing product costs Info

  • Vanguard Mega Cap Growth Index Fund ETF Shares 0.07%
  • Invesco QQQ Trust 0.20%
  • Vanguard Consumer Discretionary Index Fund ETF Shares 0.10%
  • Vanguard Information Technology Index Fund ETF Shares 0.10%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Weighted costs total (per year) 0.08%

The portfolio's total expense ratio (TER) is low at 0.08%, indicating cost-effective management. Low costs are beneficial as they allow more of the investment returns to be retained, enhancing overall performance. This cost efficiency is particularly important for long-term investors, as even small differences in fees can significantly impact returns over time. To maintain this advantage, continue prioritizing low-cost investment options and regularly review the expense ratios of existing holdings to ensure they remain competitive.

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