High Risk Low Diversification Portfolio with Strong Tech Focus and Growth Potential

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.

What type of investor this portfolio is suitable for

Growth Investors

This portfolio suits a growth-oriented investor with a high risk tolerance, seeking substantial returns over the long term. Such investors are comfortable with market volatility and prioritize capital appreciation over immediate income. They typically have a longer investment horizon, allowing them to ride out market fluctuations and benefit from potential long-term growth.

Positions

  • Vanguard Information Technology Index Fund ETF Shares
    VGT - US92204A7028
    40.00%
  • Vanguard S&P 500 ETF
    VOO - US9229083632
    40.00%
  • Schwab U.S. Dividend Equity ETF
    SCHD - US8085247976
    20.00%

The portfolio is composed of three ETFs, with a strong emphasis on the Vanguard Information Technology Index Fund and the Vanguard S&P 500 ETF, each making up 40% of the portfolio. The remaining 20% is allocated to the Schwab U.S. Dividend Equity ETF. This allocation results in a low diversification score, as the portfolio is heavily weighted towards technology and large-cap U.S. stocks. A more balanced allocation could reduce risk and improve resilience against sector-specific downturns.

Growth Info

Historically, the portfolio has performed well, with a compound annual growth rate (CAGR) of 16.79%. However, it has also experienced significant volatility, with a maximum drawdown of -32.69%. This indicates a high-risk, high-reward profile, suitable for investors with a strong stomach for market fluctuations. The days that make up 90% of returns being just 39 highlights the importance of timing in such a concentrated portfolio.

Projection Info

Using a Monte Carlo simulation with 1,000 runs, the portfolio shows promising forward projections with an annualized return of 17.48%. The 5th percentile ending value is 121.63%, while the median is 685.8%, and the 67th percentile is 974.54%. This suggests a wide range of possible outcomes, reflecting the high-risk nature of the portfolio. Monte Carlo simulations help in understanding potential future performance by modeling various market conditions.

Asset classes

  • Stocks
    100%
  • Cash
    0%

The portfolio is almost entirely composed of stocks, with a negligible allocation to cash. This singular focus on equities aligns with the growth profile but leaves the portfolio vulnerable to stock market volatility. Diversifying into different asset classes like bonds or commodities could help in balancing risk and providing more stability during market downturns.

Sectors

  • Technology
    55%
  • Financials
    9%
  • Health Care
    7%
  • Consumer Discretionary
    6%
  • Industrials
    5%
  • Consumer Staples
    5%
  • Telecommunications
    5%
  • Energy
    4%
  • Utilities
    1%
  • Basic Materials
    1%
  • Real Estate
    1%

Sector allocation is heavily skewed towards technology, making up 55.04% of the portfolio. Other sectors like financial services, healthcare, and consumer cyclicals have smaller allocations. This lack of sector diversity increases the portfolio's sensitivity to changes in the tech sector. A broader sector allocation could mitigate this risk and enhance the portfolio's resilience.

Regions

  • North America
    99%
  • Europe Developed
    1%
  • Asia Developed
    0%
  • Latin America
    0%
  • Africa/Middle East
    0%

Geographically, the portfolio is concentrated in North America, with 99.26% of assets allocated there. This regional focus limits exposure to international markets and could miss out on growth opportunities abroad. Introducing more international diversification could provide a hedge against regional economic downturns and tap into global growth trends.

Dividends

  • Schwab U.S. Dividend Equity ETF 3.30%
  • Vanguard Information Technology Index Fund ETF Shares 0.60%
  • Vanguard S&P 500 ETF 1.20%
  • Weighted yield (per year) 1.38%

The portfolio's dividend yield stands at 1.38%, primarily driven by the Schwab U.S. Dividend Equity ETF, which yields 3.3%. While dividends provide a steady income stream, this yield is relatively low compared to more income-focused portfolios. For those seeking higher income, exploring additional dividend-paying investments could be beneficial.

Ongoing product costs

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

The portfolio's costs are impressively low, with a total expense ratio of 0.06%. This cost efficiency is a significant advantage, as lower fees can enhance net returns over time. Keeping investment costs low is crucial for maximizing long-term growth, and this portfolio does well in that regard.

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.

The portfolio optimization chart suggests that there's room for improvement in risk and return balance. Adjusting along the efficient frontier could either increase returns by taking on more risk or reduce risk for more stability. However, before optimizing, focus on enhancing diversification across sectors, geographies, and asset classes to create a more resilient portfolio.

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