A growth-focused portfolio heavily weighted in technology with limited geographic diversity

Report created on Dec 8, 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 towards equities, with a significant portion allocated to ETFs, notably the Vanguard Total Stock Market Index Fund ETF at 61.32%. This indicates a strong preference for broad market exposure. Additionally, individual stocks like Apple, Microsoft, and Amazon provide concentrated investments in high-profile tech companies. Such a composition suggests a focus on growth through well-established companies. While this can offer substantial growth potential, it also introduces specific risks associated with sector concentration and market volatility. To balance these risks, consider diversifying into other asset classes or sectors that may perform differently under varying market conditions.

Growth Info

Historically, the portfolio has performed impressively, with a compound annual growth rate (CAGR) of 17.28%. This suggests strong past returns, likely driven by the tech-heavy allocation. However, the maximum drawdown of -26.12% highlights the potential for significant losses during market downturns. Understanding past performance is crucial, but it's important to remember that historical data does not guarantee future results. Investors should consider their risk tolerance and the potential for similar drawdowns in the future. To mitigate risks, it might be worth exploring strategies to protect against downside risk, such as incorporating more defensive assets.

Projection Info

The Monte Carlo simulation, which uses historical data to forecast future performance, suggests a wide range of potential outcomes. With 1,000 simulations, the median projected return is 997.96%, indicating robust growth potential. However, the 5th percentile shows a much lower return of 128.04%, emphasizing the inherent uncertainties. While these projections provide a glimpse into possible future scenarios, they are based on past data and assumptions that may not hold true. Investors should use these projections as one of many tools in decision-making, balancing optimism with caution. Diversifying further can help manage the risks associated with these uncertainties.

Asset classes Info

  • Stocks
    100%

The portfolio is almost entirely composed of stocks, with a negligible amount in cash. This heavy reliance on equities aligns with a growth-oriented strategy, capitalizing on the potential for higher returns. However, a lack of diversification across asset classes can increase vulnerability to stock market volatility. Diversifying into other asset classes, such as bonds or real estate, could provide some stability and reduce overall portfolio risk. By balancing growth with stability, investors can better weather market fluctuations and achieve more consistent returns over time.

Sectors Info

  • Technology
    41%
  • Consumer Discretionary
    13%
  • Consumer Staples
    9%
  • Financials
    9%
  • Health Care
    8%
  • Telecommunications
    7%
  • Industrials
    6%
  • Energy
    3%
  • Real Estate
    2%
  • Utilities
    2%
  • Basic Materials
    2%

The portfolio's sector allocation is heavily skewed towards technology, comprising 40.90% of the total. This concentration can lead to significant returns during tech booms but also poses risks if the sector underperforms. Other sectors like consumer cyclicals and consumer defensive have moderate representation, offering some diversification. However, sectors like energy, real estate, and utilities are underrepresented, limiting potential benefits from sector rotation. To mitigate sector-specific risks, consider increasing exposure to underrepresented sectors, which can provide a hedge against downturns in dominant sectors and enhance overall portfolio resilience.

Regions Info

  • North America
    99%

The geographic allocation is overwhelmingly concentrated in North America, accounting for 99.42% of the portfolio. This lack of international exposure limits the benefits of global diversification, such as reduced risk and access to growth opportunities in emerging markets. While North American markets have historically performed well, they are not immune to regional economic downturns. Expanding geographic diversification can help capture growth in other regions and provide a buffer against localized economic challenges. Consider exploring investments in Europe, Asia, and other regions to enhance diversification and potentially improve risk-adjusted 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.

The portfolio could potentially be optimized along the Efficient Frontier, which seeks the best possible risk-return ratio. Currently, an optimized portfolio at the same risk level promises an expected return of 25.94%, higher than the current portfolio's expected return. This optimization involves reallocating existing assets to achieve a better balance rather than introducing new ones. While this approach can enhance returns, it may also require adjustments to the current strategy. Investors should weigh the benefits of optimization against their risk tolerance and investment goals, ensuring alignment with their overall financial plan.

Dividends Info

  • Apple Inc 0.40%
  • Avantis® U.S. Small Cap Value ETF 1.50%
  • Costco Wholesale Corp 2.00%
  • Microsoft Corporation 0.50%
  • Invesco NASDAQ 100 ETF 0.60%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.20%
  • Weighted yield (per year) 1.00%

The portfolio offers a modest dividend yield of 1.0%, with contributions from holdings like Costco and the Vanguard Total Stock Market Index Fund ETF. While dividends provide a steady income stream, the portfolio's growth focus suggests that capital appreciation is the primary objective. Investors seeking higher income might consider increasing exposure to dividend-paying stocks or funds. However, it's essential to balance income needs with growth goals. Maintaining a mix of growth and income-generating assets can enhance total returns and provide flexibility to adapt to changing financial needs.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Invesco NASDAQ 100 ETF 0.15%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Weighted costs total (per year) 0.04%

The portfolio's total expense ratio (TER) is relatively low at 0.04%, with the Vanguard Total Stock Market Index Fund ETF contributing significantly to this efficiency. Keeping costs low is crucial for maximizing net returns over time, as high fees can erode investment gains. While the current costs are commendable, it's always beneficial to review and compare fees periodically. Consider exploring cost-effective investment options or negotiating fees with financial advisors. By minimizing expenses, investors can enhance their long-term returns and achieve financial goals more efficiently.

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