A tech-heavy growth portfolio with high risk and low geographic diversification

Report created on Dec 9, 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 concentrated in technology-focused ETFs, with a significant portion in the Invesco NASDAQ 100 ETF and Vanguard Information Technology Index Fund ETF Shares, each making up 35% of the total. The remaining 30% is split between the Vanguard S&P 500 ETF and VanEck Semiconductor ETF. This allocation suggests a strong preference for growth-oriented investments, particularly in the tech sector. While this can offer substantial upside potential, it also means the portfolio is less diversified, which may increase volatility. Consider diversifying into other sectors or asset classes to mitigate risk while maintaining growth potential.

Growth Info

Historically, the portfolio has delivered impressive returns, with a compound annual growth rate (CAGR) of 19.21%. However, it has also experienced significant drawdowns, with a maximum loss of 34.17%. This indicates that while the portfolio is capable of generating high returns, it is also susceptible to periods of substantial loss. Past performance does not guarantee future results, and it's crucial to consider both the potential for high returns and the risk of large drawdowns when evaluating this portfolio.

Projection Info

Monte Carlo simulations, which use historical data to project potential future outcomes, suggest a wide range of possible returns for this portfolio. With an annualized return of 22.9% across simulations, the 5th percentile shows a potential return of 171.2%, while the 67th percentile suggests a return of 1,848.25%. This highlights the uncertainty and volatility associated with the portfolio's current allocation. While these projections can offer insights, they are based on historical performance and may not fully predict future market conditions.

Asset classes Info

  • Stocks
    100%

The portfolio is almost entirely invested in stocks, with 99.82% allocated to equities and a minimal 0.18% in cash. This heavy emphasis on stocks reflects a high-risk, high-reward strategy typical of growth-focused portfolios. While equities can offer substantial returns, they also come with increased volatility. To achieve a more balanced risk profile, consider incorporating other asset classes such as bonds or real estate, which can provide stability and income during market downturns.

Sectors Info

  • Technology
    69%
  • Telecommunications
    8%
  • Consumer Discretionary
    7%
  • Health Care
    4%
  • Consumer Staples
    3%
  • Financials
    3%
  • Industrials
    3%
  • Utilities
    1%
  • Energy
    1%
  • Basic Materials
    1%
  • Real Estate
    1%

With 69.21% of the portfolio invested in the technology sector, there is a significant sectoral concentration. This focus can lead to impressive returns during tech booms but also increases vulnerability to sector-specific downturns. Other sectors such as communication services and consumer cyclicals are represented but in much smaller proportions. Diversifying into sectors like healthcare or industrials could reduce risk and enhance stability, potentially smoothing out returns over time.

Regions Info

  • North America
    97%
  • Europe Developed
    1%
  • Asia Developed
    1%

The portfolio is predominantly focused on North American assets, with 96.75% of holdings based in this region. This geographic concentration exposes the portfolio to regional economic and political risks. While the US market has historically been strong, diversifying into other regions, such as Europe or Asia, could provide exposure to different economic cycles and growth opportunities. Expanding geographic diversification can help mitigate risks associated with regional downturns.

Redundant positions Info

  • Invesco NASDAQ 100 ETF
    Vanguard Information Technology Index Fund ETF Shares
    High correlation

The portfolio's assets, particularly the Invesco NASDAQ 100 ETF and Vanguard Information Technology Index Fund ETF Shares, are highly correlated. This means they tend to move in the same direction, which can amplify risk during market downturns. High correlation reduces the diversification benefits, as the portfolio is likely to experience similar performance across its major holdings. Consider reducing exposure to correlated assets and introducing investments that have a lower correlation to enhance diversification and risk management.

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 be optimized using the Efficient Frontier, which aims to achieve the best possible risk-return ratio. Current holdings show potential for improvement by reducing overlap and reallocating assets to achieve a more efficient portfolio. The optimized portfolio is expected to deliver a return of 19.91% with a risk level of 20.02%, slightly better than the current setup. This involves keeping the same assets but adjusting their weightings to enhance the risk-return profile.

Dividends Info

  • Invesco NASDAQ 100 ETF 0.60%
  • VanEck Semiconductor ETF 0.40%
  • Vanguard Information Technology Index Fund ETF Shares 0.60%
  • Vanguard S&P 500 ETF 1.20%
  • Weighted yield (per year) 0.70%

The portfolio's dividend yield is relatively low at 0.7%, reflecting its focus on growth rather than income. While dividends can provide a steady income stream, growth-oriented portfolios often prioritize capital appreciation over regular income. Investors seeking higher income may consider adding dividend-paying stocks or ETFs to balance the growth focus with more consistent returns. This could provide additional stability and cash flow, especially during market volatility.

Ongoing product costs Info

  • Invesco NASDAQ 100 ETF 0.15%
  • VanEck Semiconductor ETF 0.35%
  • Vanguard Information Technology Index Fund ETF Shares 0.10%
  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.13%

The portfolio's total expense ratio (TER) is 0.13%, which is relatively low. This suggests that the portfolio is cost-effective, with minimal expenses eating into returns. Lower costs can significantly enhance long-term performance, as fees compound over time. However, it's always beneficial to review and compare the costs of potential investments regularly to ensure competitiveness. Opting for low-cost index funds or ETFs can help maintain the cost efficiency of the portfolio.

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