A growth-focused portfolio with high risk exposure and limited diversification across sectors
Report created on Jan 8, 2025Risk profile
5/7
Diversification profile
2/5
Positions
-
QQ Invesco NASDAQ 100 ETF
QQQM - US46138G6492 50.00% -
VT Vanguard Total Stock Market Index Fund ETF Shares
VTI - US9229087690 50.00%
This portfolio is evenly split between two ETFs: Invesco NASDAQ 100 and Vanguard Total Stock Market Index. Both ETFs are heavily weighted in stocks, offering significant growth potential but limited diversification. Compared to a typical balanced portfolio, this composition leans heavily towards equities, which can lead to higher volatility. A more diversified portfolio might include bonds or other asset classes to manage risk. Consider introducing additional asset types to balance growth with stability, especially if nearing retirement or needing more predictable returns.
Growth
Historically, this portfolio has shown impressive growth with a CAGR of 15.43%. A hypothetical investment of $10,000 would have grown significantly over the years. However, it has also experienced a maximum drawdown of -30.14%, indicating potential vulnerability during market downturns. This performance suggests that while the portfolio can generate substantial returns, it is also susceptible to sharp declines. To mitigate this, consider strategies to protect against downside risk, such as incorporating assets that tend to perform well during market stress.
Projection
Using Monte Carlo simulations, which model potential future outcomes based on historical data, the portfolio shows promising growth with a median projected return of 579.22%. However, projections also show a range of outcomes, with some scenarios resulting in minimal gains. This highlights the uncertainty inherent in investing, as past performance doesn't guarantee future results. To enhance confidence in achieving your financial goals, regularly review and adjust your portfolio to align with changing market conditions and personal circumstances.
Asset classes
- Stocks 100%
The portfolio is almost entirely composed of stocks, with a negligible cash component. This high allocation to equities suggests a strong focus on growth, but it also increases exposure to market volatility. Compared to a diversified asset allocation, this portfolio lacks the stability that bonds or alternative investments might provide. To reduce risk, consider adding other asset classes, such as bonds or real estate, which can offer diversification benefits and potentially smoother returns over time.
Sectors
- Technology 41%
- Consumer Discretionary 13%
- Telecommunications 12%
- Health Care 8%
- Financials 7%
- Industrials 6%
- Consumer Staples 5%
- Energy 2%
- Utilities 2%
- Basic Materials 2%
- Real Estate 2%
The portfolio shows a significant concentration in the technology sector, comprising over 40% of holdings. While this offers exposure to high-growth industries, it also increases sensitivity to tech sector volatility and regulatory changes. In contrast, sectors like real estate and utilities are underrepresented. A more balanced sector allocation could reduce risk and improve resilience against sector-specific downturns. Consider diversifying sector exposure to mitigate risks associated with over-concentration in a single sector.
Regions
- North America 99%
- Europe Developed 1%
Geographically, the portfolio is heavily biased towards North America, with over 98% exposure. This limited international diversification may miss growth opportunities in emerging markets or other developed regions. A more geographically diverse portfolio could reduce country-specific risks and capitalize on global economic trends. Consider increasing exposure to international markets 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's current allocation may not be optimized according to the Efficient Frontier, a concept that seeks the best possible risk-return ratio. By adjusting the weights of existing assets, you might achieve a more efficient balance. This doesn't necessarily mean adding new assets, but rather reallocating within the current holdings to enhance performance. Regular reviews and adjustments can ensure the portfolio remains aligned with your risk tolerance and investment goals.
Dividends
- Invesco NASDAQ 100 ETF 0.60%
- Vanguard Total Stock Market Index Fund ETF Shares 1.30%
- Weighted yield (per year) 0.95%
The portfolio's dividend yield stands at 0.95%, with the Vanguard ETF contributing a higher yield of 1.3%. While dividends provide a steady income stream, this yield is modest compared to income-focused portfolios. For investors seeking regular income, consider incorporating higher-yielding assets or dividend-focused funds. However, be mindful that higher yields can sometimes indicate higher risk, so balance is key to maintaining growth objectives.
Ongoing product costs
- Invesco NASDAQ 100 ETF 0.15%
- Vanguard Total Stock Market Index Fund ETF Shares 0.03%
- Weighted costs total (per year) 0.09%
The portfolio's total expense ratio (TER) is 0.09%, which is impressively low. This cost efficiency supports better long-term performance by minimizing the drag on returns. Low costs are a positive aspect of the portfolio, allowing more of your investment to compound over time. While costs are well-managed, continue to monitor for any potential changes in fees and explore opportunities to further reduce expenses without compromising on quality.
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