High Growth Potential but Low Diversification Portfolio with Heavy Technology Focus and Moderate Risk

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 who is comfortable with moderate risk and seeks high potential returns. Such investors typically have a longer investment horizon, allowing them to weather market volatility. They are often less concerned with immediate income and more focused on capital appreciation. A willingness to accept market fluctuations in pursuit of higher gains characterizes these investors, making them well-suited for a portfolio with a strong emphasis on equities and technology.

Positions

  • Schwab U.S. Large-Cap Growth ETF
    SCHG - US8085243009
    30.00%
  • SPDR® Portfolio S&P 500 ETF
    SPLG - US78464A8541
    30.00%
  • Avantis® U.S. Small Cap Value ETF
    AVUV - US0250728773
    10.00%
  • Schwab U.S. Dividend Equity ETF
    SCHD - US8085247976
    10.00%
  • VanEck Semiconductor ETF
    SMH - US92189F6768
    10.00%
  • Vanguard Information Technology Index Fund ETF Shares
    VGT - US92204A7028
    10.00%

This portfolio is made up of six different ETFs, with a significant focus on large-cap growth and technology sectors. The Schwab U.S. Large-Cap Growth ETF and SPDR® Portfolio S&P 500 ETF together form 60% of the portfolio, indicating a strong leaning towards established, large companies. Such a composition can offer potential high returns but may lack diversification. The inclusion of small-cap value and dividend-focused ETFs provides some balance, but the dominance of technology-focused investments suggests a concentrated risk. Given the low diversification score, exploring additional asset classes or sectors could enhance stability.

Growth Info

Historically, this portfolio has demonstrated impressive performance, with a compound annual growth rate (CAGR) of 21.52%. However, this comes with a significant max drawdown of -33.87%, indicating potential vulnerability during market downturns. The high returns are concentrated in a few days, which means missing these could drastically affect overall performance. While high growth is appealing, it also suggests volatility. Maintaining a balance between risk and reward is crucial, and considering more stable investments could mitigate the impact of future downturns.

Projection Info

Using a Monte Carlo simulation with 1,000 iterations, we see a promising forward projection for this portfolio. With a hypothetical initial investment, the median outcome shows a potential growth of 1,465.91%, while even the more conservative 5th percentile indicates a 167.35% increase. This suggests a strong likelihood of positive returns, with an annualized return of 25.39% across all simulations. However, it's important to remember that these are projections based on historical data and assumptions, and actual future performance can vary significantly.

Asset classes

  • Stocks
    100%
  • Cash
    0%

The portfolio is heavily weighted towards stocks, making up nearly 100% of the asset allocation, with a negligible amount in cash. This singular focus on equities aligns with the growth profile but lacks the balance that other asset classes, like bonds, could provide. Such concentration can increase the portfolio's risk during market volatility. Diversifying into different asset classes could help in spreading risk and achieving a more stable performance over time, particularly for investors with a lower risk tolerance.

Sectors

  • Technology
    46%
  • Financials
    11%
  • Consumer Discretionary
    10%
  • Health Care
    8%
  • Telecommunications
    7%
  • Industrials
    6%
  • Energy
    4%
  • Consumer Staples
    4%
  • Basic Materials
    2%
  • Utilities
    1%
  • Real Estate
    1%

Sector allocation reveals a heavy concentration in technology, which accounts for over 46% of the portfolio. While this sector has driven strong returns historically, it also introduces sector-specific risks. Other sectors like financial services and consumer cyclicals are represented but to a lesser extent. This imbalance could expose the portfolio to significant swings based on the performance of the tech industry. Diversifying across more sectors could help mitigate these risks and provide a smoother return profile.

Regions

  • North America
    97%
  • Asia Developed
    1%
  • Europe Developed
    1%
  • Latin America
    0%
  • Asia Emerging
    0%
  • Africa/Middle East
    0%

Geographically, the portfolio is overwhelmingly concentrated in North America, with 97.44% of assets based there. This focus can be beneficial if the U.S. market continues to perform well but also exposes the portfolio to regional risks. Minimal exposure to other developed and emerging markets suggests a missed opportunity for diversification and growth. Including more international investments could offer a hedge against domestic market volatility and tap into growth opportunities abroad.

Redundant positions

  • Schwab U.S. Large-Cap Growth ETF
    Vanguard Information Technology Index Fund ETF Shares
    VanEck Semiconductor ETF
    SPDR® Portfolio S&P 500 ETF
    High correlation

The portfolio exhibits high correlation among its largest holdings, particularly within the technology-focused ETFs. This means that these assets tend to move in tandem, reducing the potential benefits of diversification. While correlated assets can amplify gains in a rising market, they also increase risk during downturns. Reducing overlap by introducing less correlated assets could improve diversification, providing a more resilient portfolio structure that can better withstand market fluctuations.

Dividends

  • Avantis® U.S. Small Cap Value ETF 1.50%
  • Schwab U.S. Dividend Equity ETF 3.30%
  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • VanEck Semiconductor ETF 0.40%
  • SPDR® Portfolio S&P 500 ETF 1.20%
  • Vanguard Information Technology Index Fund ETF Shares 0.60%
  • Weighted yield (per year) 1.06%

The portfolio's dividend yield stands at 1.06%, with the Schwab U.S. Dividend Equity ETF contributing the highest yield of 3.3%. This indicates a modest income component, which can be beneficial for reinvestment or as a source of cash flow. While growth is the primary focus, enhancing the dividend yield through diversified income-generating investments could provide additional stability and returns, especially during periods of market volatility when capital appreciation might slow.

Ongoing product costs

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • VanEck Semiconductor ETF 0.35%
  • SPDR® Portfolio S&P 500 ETF 0.02%
  • Vanguard Information Technology Index Fund ETF Shares 0.10%
  • Weighted costs total (per year) 0.09%

The portfolio's total expense ratio (TER) is relatively low at 0.09%, which is advantageous for long-term growth as it minimizes the drag on returns. Among the ETFs, the VanEck Semiconductor ETF has the highest cost at 0.35%, while the SPDR® Portfolio S&P 500 ETF is the most cost-effective at 0.02%. Keeping investment costs low is a crucial aspect of maximizing net returns. Regularly reviewing and potentially adjusting holdings to maintain a low-cost structure can enhance overall portfolio performance.

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.

Before optimizing this portfolio, addressing the high correlation among assets is crucial. Reducing overlap will enhance diversification benefits. To achieve a riskier or more conservative portfolio, consider adjusting the balance between high-growth and stable assets along the efficient frontier. This involves shifting allocations to either increase potential returns or reduce volatility, depending on your risk tolerance and financial goals. Prioritizing diversification and a balanced risk-return profile will create a more resilient portfolio.

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