Growth-focused portfolio with a strong tilt towards technology and high historical returns

Report created on Jan 11, 2025

Risk profile

  • Secure
    Speculative

The risk profile, derived from past market volatility, reflects the level of risk the portfolio is exposed to. This assessment helps align your investments with your financial goals and comfort with market fluctuations.

Diversification profile

  • Focused
    Diversified

The diversification assessment evaluates the spread of investments across asset classes, regions, and sectors. This ensures a balanced mix, reducing risk and maximizing returns by not concentrating in any single area.

Positions

The portfolio is heavily weighted towards equities, with a 99.62% allocation to stocks and a small cash position. It includes well-known ETFs like the Vanguard S&P 500 and Invesco QQQ Trust. This composition suggests a focus on growth, aligning with a moderately diversified strategy. Compared to typical benchmark portfolios, this portfolio leans more heavily on equities, which can be beneficial for growth but may increase risk. To enhance diversification, consider adding other asset classes like bonds or real estate, which can help manage risk during market downturns.

Growth Info

Historically, the portfolio has performed well, with a Compound Annual Growth Rate (CAGR) of 15.68%. This outperforms many benchmarks, indicating strong growth potential. However, the max drawdown of -31.47% highlights potential volatility, especially during market downturns. Such performance suggests that while the portfolio has been rewarding, it also carries significant risk. It's important to remember that past performance doesn't guarantee future results. To mitigate potential losses, consider strategies like rebalancing or adding more conservative assets.

Projection Info

The Monte Carlo simulation, which uses historical data to predict future outcomes, shows a wide range of potential returns. With a 50th percentile return of 502.49%, the portfolio has a promising outlook. However, the 5th percentile shows a return of only 73.54%, indicating possible downside risks. While simulations can offer insight, they are not foolproof predictions. It's crucial to remain cautious and adaptable, regularly reviewing and adjusting the portfolio to align with changing market conditions and personal financial goals.

Asset classes Info

  • Stocks
    100%

The portfolio's allocation is heavily skewed towards stocks, with minimal exposure to other asset classes. This concentration can lead to higher volatility, especially during market downturns. Diversification across asset classes is key to managing risk and achieving more stable returns. By incorporating other types of investments, such as bonds or commodities, the portfolio could benefit from reduced volatility and improved risk-adjusted returns. Consider gradually introducing these asset classes to achieve a more balanced and diversified investment strategy.

Sectors Info

  • Technology
    42%
  • Consumer Discretionary
    10%
  • Financials
    9%
  • Telecommunications
    9%
  • Health Care
    8%
  • Industrials
    7%
  • Consumer Staples
    6%
  • Energy
    3%
  • Utilities
    2%
  • Basic Materials
    2%
  • Real Estate
    1%

The portfolio is notably concentrated in the technology sector, which makes up 42.12% of the allocation. This tech-heavy focus can lead to higher volatility, particularly during periods of interest rate hikes or tech sector downturns. While technology has been a strong growth driver, over-reliance on a single sector can increase risk. Balancing exposure across various sectors could enhance stability and reduce sector-specific risks. Consider gradually increasing allocations to underrepresented sectors to achieve a more balanced sectoral exposure.

Regions Info

  • North America
    92%
  • Europe Developed
    4%
  • Asia Emerging
    1%
  • Japan
    1%
  • Asia Developed
    1%

Geographically, the portfolio is predominantly invested in North America, accounting for 91.54% of the allocation. This concentration can limit diversification benefits and expose the portfolio to regional economic risks. While North American markets have been strong performers, global diversification can provide access to different growth opportunities and reduce regional risks. Consider increasing exposure to other regions like Europe or Asia to achieve a more globally diversified portfolio, which could enhance long-term growth potential.

Redundant positions Info

  • iShares Core Dividend Growth ETF
    Vanguard S&P 500 ETF
    Schwab U.S. Dividend Equity ETF
    High correlation
  • Vanguard Information Technology Index Fund ETF Shares
    Invesco QQQ Trust
    High correlation

The portfolio contains highly correlated assets, particularly among U.S. equity ETFs. High correlation means these assets tend to move together, limiting diversification benefits during market downturns. While correlation can enhance returns in rising markets, it can also amplify losses when markets fall. To improve diversification, consider reducing exposure to overlapping assets and introducing investments with lower correlation to the existing holdings. This approach can help manage risk and stabilize returns over time.

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 benefit from optimization using the Efficient Frontier, which aims to achieve the best possible risk-return ratio with the current assets. This involves adjusting the allocation to balance risk and return more effectively. However, before optimizing, it's crucial to address the high correlation among assets, as diversification benefits are limited. Once adjusted, using the Efficient Frontier can help identify the most efficient allocation, maximizing returns for a given level of risk without altering the overall asset composition.

Dividends Info

  • iShares Core Dividend Growth ETF 2.30%
  • Invesco QQQ Trust 0.60%
  • Schwab U.S. Dividend Equity ETF 3.70%
  • Vanguard Information Technology Index Fund ETF Shares 0.60%
  • Vanguard S&P 500 ETF 1.30%
  • Vanguard Total International Stock Index Fund ETF Shares 3.40%
  • Weighted yield (per year) 1.42%

The portfolio's dividend yield stands at 1.42%, with contributions from ETFs like Schwab U.S. Dividend Equity and Vanguard Total International Stock Index. While dividends can provide a steady income stream, the focus on growth suggests capital appreciation is the primary goal. For investors seeking more income, increasing exposure to high-dividend-paying assets could be beneficial. However, this may also shift the risk-return profile. It's important to balance income needs with growth objectives to maintain alignment with overall investment goals.

Ongoing product costs Info

  • iShares Core Dividend Growth ETF 0.08%
  • Invesco QQQ Trust 0.20%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • Vanguard Information Technology Index Fund ETF Shares 0.10%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.10%

The portfolio's total expense ratio (TER) is 0.1%, which is relatively low and supports better long-term performance by minimizing costs. Low fees are beneficial as they allow more of the investment returns to compound over time. This cost efficiency aligns well with best practices in portfolio management. However, it's always worth reviewing individual ETF fees to ensure they remain competitive. Keeping costs low should continue to be a priority to enhance net returns.

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