A growth-focused portfolio with significant tech exposure and low geographic diversity

Report created on Jan 14, 2025

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 US equities, with a substantial 45% in the Vanguard S&P 500 ETF and 25% in the Invesco NASDAQ 100 ETF. This composition leans heavily into large-cap stocks, reflecting a growth-oriented strategy. Compared to a typical balanced portfolio, this setup is aggressive, focusing on potential high returns but carrying higher risk. To balance risk, consider incorporating more diverse asset types, such as bonds or international equities, which can provide stability and reduce volatility.

Growth Info

Historically, the portfolio has delivered strong returns with a Compound Annual Growth Rate (CAGR) of 20.04%. This impressive performance reflects the strength of the US stock market, particularly in tech-driven sectors. However, a maximum drawdown of -32.2% indicates significant volatility. While past performance is not indicative of future results, understanding these trends helps set realistic expectations. To mitigate potential downturns, consider strategies like rebalancing or increasing cash reserves to take advantage of buying opportunities during dips.

Projection Info

Monte Carlo simulations project a wide range of potential outcomes, with a median (50th percentile) return of 1,868.09%. These simulations use historical data to model future performance, highlighting both the potential for substantial growth and the inherent risks. While the annualized return of 28.06% is promising, it's crucial to remember that these projections are not guarantees. Diversifying further could help stabilize returns, ensuring the portfolio remains resilient under different market conditions.

Asset classes Info

  • Stocks
    100%

The portfolio is almost entirely composed of stocks, accounting for 99.88% of the allocation. This heavy concentration in equities suggests a high-risk, high-reward strategy, suitable for aggressive growth. However, it lacks the balance typically seen in diversified portfolios, which might include bonds or other fixed-income assets. Introducing a mix of asset classes could enhance diversification, reducing risk and potentially smoothing out returns over time, especially during volatile market periods.

Sectors Info

  • Technology
    43%
  • Consumer Discretionary
    10%
  • Telecommunications
    10%
  • Financials
    9%
  • Health Care
    9%
  • Industrials
    6%
  • Consumer Staples
    5%
  • Energy
    3%
  • Utilities
    2%
  • Basic Materials
    2%
  • Real Estate
    2%

Technology dominates the portfolio, comprising 42.72% of the total allocation. This sectoral concentration aligns with recent market trends favoring tech stocks but increases exposure to sector-specific risks, such as regulatory changes or market corrections. While tech has driven growth, consider diversifying into other sectors like healthcare or consumer goods to reduce volatility and capture opportunities in different economic cycles. Balancing sector exposure can enhance resilience against sudden market shifts.

Regions Info

  • North America
    99%
  • Europe Developed
    1%

The portfolio's geographic exposure is overwhelmingly skewed towards North America, at 99.06%. This limited geographic diversity exposes the portfolio to regional risks, such as economic downturns or policy changes in the US. To mitigate these risks, consider increasing exposure to international markets, which can offer growth opportunities and diversification benefits. Expanding into emerging markets or developed economies outside North America could provide a buffer against localized economic challenges.

Redundant positions Info

  • Vanguard Total Stock Market Index Fund ETF Shares
    Vanguard S&P 500 ETF
    High correlation

The portfolio contains highly correlated assets, particularly the Vanguard Total Stock Market Index Fund ETF and the Vanguard S&P 500 ETF. High correlation means these assets tend to move together, reducing the diversification benefits typically sought in a portfolio. To optimize risk management, consider replacing one of these ETFs with less correlated assets. This change can enhance diversification, improving the portfolio's ability to weather market fluctuations and reducing the impact of downturns.

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.

Current portfolio optimization suggests focusing on reducing overlap among highly correlated assets to enhance diversification. The Efficient Frontier concept, which identifies the best possible risk-return ratio, can guide adjustments. By reallocating funds from correlated ETFs to less correlated, potentially lower-risk assets, the portfolio can achieve a more balanced risk-return profile. This strategy aims to maximize returns without increasing risk, aligning with growth objectives while managing volatility.

Dividends Info

  • Invesco NASDAQ 100 ETF 0.60%
  • Schwab U.S. Dividend Equity ETF 3.60%
  • Vanguard S&P 500 ETF 1.30%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Weighted yield (per year) 1.11%

The portfolio's dividend yield stands at 1.11%, with the Schwab U.S. Dividend Equity ETF contributing a notable 3.6%. While growth is the primary focus, dividends provide a steady income stream, which can be reinvested for compounding returns. For investors seeking income, increasing the allocation to dividend-focused assets could boost yield. However, ensure this aligns with overall growth objectives, as higher dividends often come at the expense of capital appreciation.

Ongoing product costs Info

  • Invesco NASDAQ 100 ETF 0.15%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Weighted costs total (per year) 0.06%

The portfolio benefits from low costs, with a Total Expense Ratio (TER) of 0.06%. This efficient cost structure supports better long-term performance by minimizing expenses that can erode returns. Maintaining low costs is crucial, especially for growth-focused portfolios where every percentage point counts. Regularly review and compare expense ratios to ensure they remain competitive. Consider replacing high-cost assets with lower-cost alternatives to further optimize cost efficiency.

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