A tech-heavy growth portfolio with strong historical performance but low diversification

Report created on Jan 1, 2025

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

This portfolio consists of two major ETFs: Vanguard Information Technology Index Fund and Vanguard S&P 500 ETF, each making up 50% of the total allocation. This results in a high concentration in equities, particularly in the technology sector. While this structure aligns with a growth-focused strategy, it lacks diversity across different asset classes. Compared to a balanced benchmark, which might include bonds or alternative investments, this portfolio is more aggressive and potentially more volatile. To enhance stability, consider incorporating a broader range of asset classes.

Growth Info

Historically, the portfolio has delivered a strong CAGR of 17.98%, indicating impressive growth over time. This performance is notable when compared to typical market indices, which often yield lower returns. However, the portfolio also experienced a significant maximum drawdown of -32.67%, illustrating its vulnerability during market downturns. It's important to remember that past performance does not guarantee future results. To mitigate potential losses, consider strategies to reduce volatility, such as diversifying across sectors and asset classes.

Projection Info

Forward projections using Monte Carlo simulations suggest a wide range of potential outcomes, with a 50th percentile end value of 928.47% and an annualized return of 19.8%. Monte Carlo simulations use historical data to model potential future performance, but they are not foolproof. While the high number of simulations with positive returns is encouraging, it's crucial to understand that these projections are based on past trends and can be affected by unforeseen market changes. Regularly reviewing and adjusting the portfolio can help manage risk.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily weighted towards stocks, making up 99.76% of the allocation, with a negligible cash position. This heavy stock concentration supports a high growth strategy but exposes the portfolio to significant market volatility. Compared to diversified portfolios that include bonds or real estate, this single asset class focus may lead to higher risk. Introducing a mix of asset classes can help cushion against market fluctuations and provide more stable returns over time.

Sectors Info

  • Technology
    66%
  • Financials
    7%
  • Health Care
    6%
  • Consumer Discretionary
    5%
  • Telecommunications
    5%
  • Industrials
    4%
  • Consumer Staples
    3%
  • Energy
    2%
  • Utilities
    1%
  • Real Estate
    1%
  • Basic Materials
    1%

With 66.14% of the portfolio in the technology sector, there's a clear concentration risk. While tech has been a strong performer, it can also be highly volatile, especially during interest rate hikes or regulatory changes. Other sectors like financial services and healthcare have minimal representation. This imbalance could limit potential gains from sector rotation or broader market trends. Consider diversifying sector exposure to include more stable sectors, which can provide balance during tech sector downturns.

Regions Info

  • North America
    99%

Geographically, the portfolio is overwhelmingly concentrated in North America, accounting for 99.24% of assets. This regional focus can be a double-edged sword, offering strong performance during local market booms but increased risk during downturns. Exposure to other regions like Europe or Asia is minimal, which could limit opportunities from global growth. To enhance diversification, consider increasing international exposure, potentially through global or emerging market ETFs, to capture broader economic trends.

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 fully optimized on the Efficient Frontier, which seeks the best risk-return ratio. With a high concentration in tech and U.S. equities, the portfolio may not achieve optimal diversification. The Efficient Frontier suggests that varying asset allocations can improve returns for a given level of risk. Consider rebalancing to include a mix of assets that better align with desired risk levels, potentially increasing diversification and enhancing risk-adjusted returns.

Dividends Info

  • Vanguard Information Technology Index Fund ETF Shares 0.60%
  • Vanguard S&P 500 ETF 1.20%
  • Weighted yield (per year) 0.90%

The portfolio's dividend yield stands at 0.9%, with the S&P 500 ETF contributing a higher yield of 1.2% compared to the tech ETF's 0.6%. For growth-focused investors, dividends may be less of a priority, but they can provide a steady income stream and help cushion against volatility. In low-yield environments, reinvesting dividends can enhance compounding returns. If income is a goal, consider adding higher-yielding assets to boost the portfolio's overall yield.

Ongoing product costs Info

  • Vanguard Information Technology Index Fund ETF Shares 0.10%
  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.06%

With a total expense ratio (TER) of 0.06%, the portfolio is cost-efficient, supporting better net returns over the long term. Low costs are a significant advantage, as they help maximize gains by minimizing the drag on performance. This aligns well with best practices for maintaining a cost-effective investment strategy. Regularly reviewing expense ratios and considering low-cost alternatives can further enhance cost efficiency and improve overall portfolio performance.

What next?

Ready to invest in this portfolio?

Select a broker that fits your needs and watch for low fees to maximize your returns.

Select broker

Create your own report?

Analyze your portfolio

Join our community!

Join Discord

The information provided on this platform is for informational purposes only and should not be considered as financial or investment advice. Insightfolio does not provide investment advice, personalized recommendations, or guidance regarding the purchase, holding, or sale of financial assets. The tools and content are intended for educational purposes only and are not tailored to individual circumstances, financial needs, or objectives.

Insightfolio assumes no liability for the accuracy, completeness, or reliability of the information presented. Users are solely responsible for verifying the information and making independent decisions based on their own research and careful consideration. Use of the platform should not replace consultation with qualified financial professionals.

Investments involve risks. Users should be aware that the value of investments may fluctuate and that past performance is not an indicator of future results. Investment decisions should be based on personal financial goals, risk tolerance, and independent evaluation of relevant information.

Insightfolio does not endorse or guarantee the suitability of any particular financial product, security, or strategy. Any projections, forecasts, or hypothetical scenarios presented on the platform are for illustrative purposes only and are not guarantees of future outcomes.

By accessing the services, information, or content offered by Insightfolio, users acknowledge and agree to these terms of the disclaimer. If you do not agree to these terms, please do not use our platform.

Instrument logos provided by Elbstream.

Help us improve Insightfolio

Your feedback makes a difference! Share your thoughts in our quick survey. Take the survey