Growth-Oriented Portfolio with High Technology Exposure and Moderate Diversification
Report created on Dec 4, 2024Risk profile
5/7
Diversification profile
3/5
Positions
-
VT Vanguard Total Stock Market Index Fund ETF Shares
VTI - US9229087690 42.73% -
VG Vanguard Information Technology Index Fund ETF Shares
VGT - US92204A7028 22.74% -
VU Vanguard Growth Index Fund ETF Shares
VUG - US9229087369 17.80% -
VX Vanguard Total International Stock Index Fund ETF Shares
VXUS - US9219097683 8.83% -
AR ARK Innovation ETF
ARKK - US00214Q1040 4.24% -
QQ Invesco QQQ Trust
QQQ - US46090E1038 3.67%
The portfolio is heavily weighted towards stocks, with a significant portion allocated to ETFs. It consists of six positions, primarily dominated by Vanguard funds, which are known for their low costs and broad market exposure. The largest holding is the Vanguard Total Stock Market Index Fund ETF, making up nearly half of the portfolio. This composition suggests a focus on growth through equity investments, with a small allocation to cash and other assets. The portfolio is suitable for investors seeking long-term capital appreciation, though it may be exposed to equity market volatility.
Growth
Historically, the portfolio has performed impressively, with a compound annual growth rate (CAGR) of 16.03%. This indicates strong growth potential, although it has also experienced a maximum drawdown of -33.87%, reflecting significant volatility during market downturns. The performance is concentrated, with 90% of returns generated in just 36 days, highlighting the importance of being invested during key market movements. This historical performance suggests that while the portfolio has delivered high returns, it also entails considerable risk, requiring a long-term investment horizon to weather short-term fluctuations.
Projection
Using a Monte Carlo simulation with 1,000 iterations, the portfolio shows a wide range of potential outcomes. Assuming a hypothetical initial investment, the 5th percentile projects a 56.2% return, while the median outcome is a substantial 595.52% return. The 67th percentile projects an even higher return of 895.4%. With 984 simulations showing positive returns, the annualized return across all simulations is 17.0%. This projection suggests a high probability of positive returns, but also underscores the potential for varied outcomes, emphasizing the importance of risk management and diversification.
Asset classes
- Stocks 100%
The portfolio is almost entirely composed of stocks, with a minimal allocation to cash and other assets. This heavy equity concentration aligns with a growth-focused strategy, aiming for capital appreciation. While stocks offer high return potential, they also come with increased risk and volatility. Diversifying into other asset classes, such as bonds or alternative investments, could help mitigate risk and provide stability during market downturns. Balancing the asset allocation towards a mix of equities and fixed-income securities could enhance the portfolio's risk-adjusted returns and provide a more resilient investment strategy.
Sectors
- Technology 49%
- Financials 9%
- Consumer Discretionary 9%
- Health Care 8%
- Telecommunications 8%
- Industrials 6%
- Consumer Staples 4%
- Energy 2%
- Basic Materials 2%
- Real Estate 2%
- Utilities 1%
Technology is the dominant sector, comprising nearly half of the portfolio, followed by financial services and consumer cyclicals. This sector allocation indicates a strong bias towards tech stocks, which have driven market performance in recent years. While this concentration can lead to substantial gains, it also increases vulnerability to sector-specific risks. Diversifying across a broader range of sectors, such as healthcare or energy, could reduce dependency on technology and enhance the portfolio's resilience against sector downturns. A more balanced sector allocation can help achieve a steadier performance over time.
Regions
- North America 91%
- Europe Developed 4%
- Asia Emerging 1%
- Japan 1%
- Asia Developed 1%
The portfolio is heavily concentrated in North America, with over 90% of assets allocated there. This geographic bias exposes the portfolio to regional risks, such as economic downturns or political instability in the U.S. While North America has historically been a strong performer, diversifying into other regions could provide exposure to different growth opportunities and reduce geographic risk. Allocating a portion of the portfolio to international markets, such as Europe or emerging economies, could enhance diversification and offer potential for higher returns through global economic growth.
Redundant positions
-
High correlationVanguard Total Stock Market Index Fund ETF SharesVanguard Information Technology Index Fund ETF SharesInvesco QQQ TrustVanguard Growth Index Fund ETF Shares
The portfolio contains several highly correlated assets, particularly among the Vanguard funds and Invesco QQQ Trust. This correlation suggests that these assets tend to move in the same direction, which can reduce the diversification benefits within the portfolio. By holding correlated assets, the portfolio may not be as diversified as it appears, potentially increasing risk during market downturns. To improve diversification, consider replacing some of these overlapping positions with assets that have lower correlations, thereby spreading risk more effectively and improving the portfolio's overall 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.
Before optimizing the portfolio, focus on reducing overlapping assets that offer little diversification benefit. The efficient frontier can help achieve a riskier or more conservative portfolio by adjusting the balance between high-risk, high-return assets and more stable, lower-return investments. Moving along the efficient frontier involves reallocating assets to optimize risk and return based on individual preferences. While the current portfolio is growth-focused, introducing more diversified asset classes and sectors can enhance overall performance and align the portfolio with personal investment goals and risk tolerance.
Dividends
- Invesco QQQ Trust 0.60%
- Vanguard Information Technology Index Fund ETF Shares 0.60%
- Vanguard Total Stock Market Index Fund ETF Shares 1.20%
- Vanguard Growth Index Fund ETF Shares 0.50%
- Vanguard Total International Stock Index Fund ETF Shares 2.90%
- Weighted yield (per year) 1.02%
The portfolio's dividend yield is relatively modest at 1.02%, with contributions from various ETFs. While dividends can provide a steady income stream and enhance total returns, the focus here appears to be on capital growth rather than income generation. Investors seeking higher income may consider increasing exposure to dividend-paying stocks or income-generating assets. However, for those prioritizing growth, the current dividend yield is consistent with the portfolio's strategy. Balancing growth and income objectives can help align the portfolio with individual financial goals and risk tolerance.
Ongoing product costs
- ARK Innovation ETF 0.75%
- Invesco QQQ Trust 0.20%
- Vanguard Information Technology Index Fund ETF Shares 0.10%
- Vanguard Total Stock Market Index Fund ETF Shares 0.03%
- Vanguard Growth Index Fund ETF Shares 0.04%
- Vanguard Total International Stock Index Fund ETF Shares 0.08%
- Weighted costs total (per year) 0.09%
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