A growth-focused portfolio with high technology exposure and moderate geographic diversification

Report created on Dec 10, 2024

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

This portfolio is primarily composed of ETFs, with a significant emphasis on growth-oriented investments. The Invesco QQQ Trust holds the largest share at 25%, followed by the SPDR Kensho New Economies Composite and Vanguard Total Stock Market Index Fund, each at 20%. The remaining ETFs are allocated to small-cap and emerging markets, contributing to a moderately diversified portfolio. This structure is typical for growth portfolios, aiming for capital appreciation. While such concentration can lead to higher returns, it also increases risk. To balance this, consider diversifying into other asset classes like bonds or commodities, which can provide stability during market downturns.

Growth Info

Historically, the portfolio has demonstrated strong performance, with a compound annual growth rate (CAGR) of 16.21%. However, it also experienced a maximum drawdown of -34.04%, indicating significant volatility. This pattern is common in growth-focused portfolios, which tend to outperform in bull markets but suffer in downturns. Understanding these dynamics is crucial for setting realistic expectations. To mitigate potential losses, consider incorporating strategies such as stop-loss orders or gradually shifting a portion of the portfolio to more defensive assets as market conditions change.

Projection Info

Forward projections using Monte Carlo simulations suggest a wide range of potential outcomes. With 1,000 simulations, the portfolio's annualized return averaged 16.1%, with a 5th percentile return of 39.31% and a 67th percentile return of 792.18%. Monte Carlo simulations use historical data to estimate future returns, but they cannot predict specific outcomes. These projections highlight the portfolio's potential for significant gains, but also underscore the inherent uncertainty. Regularly review and adjust your portfolio based on changing market conditions and personal risk tolerance to stay aligned with your long-term goals.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily weighted toward stocks, with over 99% in equity and minimal allocations to cash and other assets. This concentration in equities aligns with a growth-oriented strategy, aiming for higher returns through capital appreciation. However, such a focus increases exposure to market volatility. Diversifying into other asset classes, like bonds or real estate, can help mitigate risk and provide more stable returns. Consider gradually reallocating a portion of your investments to these asset classes to enhance diversification and reduce the impact of market fluctuations.

Sectors Info

  • Technology
    32%
  • Financials
    12%
  • Industrials
    11%
  • Consumer Discretionary
    11%
  • Health Care
    10%
  • Telecommunications
    9%
  • Consumer Staples
    4%
  • Energy
    3%
  • Basic Materials
    3%
  • Utilities
    3%
  • Real Estate
    2%

Sector analysis reveals a substantial allocation to technology at 32%, followed by financial services, industrials, and consumer cyclicals. This concentration in technology reflects a bet on innovation and growth but also exposes the portfolio to sector-specific risks. A downturn in the tech industry could significantly impact overall performance. To balance this, consider adding exposure to underrepresented sectors like utilities or consumer defensives, which tend to perform well during economic slowdowns. This approach can provide a buffer against sector-specific downturns and enhance overall portfolio stability.

Regions Info

  • North America
    87%
  • Asia Emerging
    7%
  • Asia Developed
    2%
  • Latin America
    1%
  • Europe Developed
    1%
  • Africa/Middle East
    1%

Geographically, the portfolio is predominantly focused on North America, with 86.6% exposure, and limited diversification across other regions. This concentration in a single region increases vulnerability to regional economic downturns or policy changes. Expanding geographic exposure can enhance diversification and reduce risk. Consider increasing allocations to emerging markets or developed regions outside North America to benefit from global growth opportunities. This strategy can also provide a hedge against currency fluctuations and geopolitical risks that may impact specific regions.

Redundant positions Info

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

Asset correlation analysis shows a high degree of correlation between the SPDR® Portfolio S&P 500 ETF and the Vanguard Total Stock Market Index Fund. High correlation means these assets tend to move in the same direction, offering little diversification benefit. Reducing overlap by selecting assets with lower correlation can enhance diversification and improve risk management. Consider replacing one of these ETFs with an asset that has a different risk-return profile, such as international equities or fixed-income securities, to achieve a more balanced portfolio.

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.

Portfolio optimization using the Efficient Frontier can improve the risk-return ratio without adding new assets. The current portfolio has redundant, highly correlated assets, such as the SPDR® Portfolio S&P 500 ETF and Vanguard Total Stock Market Index Fund. By reallocating investments among existing assets to minimize correlation and maximize diversification, you can achieve a more efficient portfolio. This process involves adjusting the weightings to find the optimal balance between risk and return, enhancing overall performance while maintaining alignment with growth objectives.

Dividends Info

  • SPDR Kensho New Economies Composite 1.00%
  • Invesco QQQ Trust 0.60%
  • SPDR® Portfolio S&P 500 ETF 1.20%
  • SPDR® Portfolio S&P 600 Small Cap ETF 1.70%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.20%
  • Vanguard FTSE Emerging Markets Index Fund ETF Shares 2.50%
  • Weighted yield (per year) 1.22%

The portfolio's dividend yield stands at 1.22%, with contributions from various ETFs, including a 2.5% yield from the Vanguard FTSE Emerging Markets Index Fund. While dividends provide a steady income stream, they play a minor role in a growth-focused strategy. However, they can offer some downside protection during market downturns. To increase income potential, consider investing in dividend-focused ETFs or stocks with a history of consistent payouts. This can enhance overall returns and provide a cushion during volatile periods, aligning with long-term growth objectives.

Ongoing product costs Info

  • SPDR Kensho New Economies Composite 0.20%
  • Invesco QQQ Trust 0.20%
  • SPDR® Portfolio S&P 500 ETF 0.02%
  • SPDR® Portfolio S&P 600 Small Cap ETF 0.03%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Vanguard FTSE Emerging Markets Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.11%

The portfolio's total expense ratio (TER) is 0.11%, reflecting low management costs typical of ETFs. Low costs are crucial for maximizing long-term returns, as high fees can erode gains over time. The SPDR Kensho New Economies Composite and Invesco QQQ Trust have higher expense ratios at 0.2%, which could be optimized. Consider reviewing and potentially replacing higher-cost ETFs with similar, lower-cost alternatives to improve cost efficiency. Regularly monitoring and minimizing expenses can significantly enhance net returns, especially over extended investment horizons.

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