Growth-focused portfolio with high tech exposure and low geographic diversification

Report created on Feb 1, 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 toward large-cap U.S. equities, with a strong emphasis on growth. The Vanguard S&P 500 ETF, Invesco NASDAQ 100 ETF, and Schwab U.S. Large-Cap Growth ETF collectively account for 80% of the portfolio. This concentration in large-cap stocks provides stability but limits exposure to smaller, potentially high-growth companies. Compared to a typical balanced portfolio, this one is skewed toward growth, reflecting a higher risk tolerance. To enhance diversification, consider incorporating different asset classes, such as bonds or international equities, which can help balance out the portfolio's risk profile.

Growth Info

The historical performance of this portfolio shows a strong CAGR of 18.03%, which is impressive. However, it's essential to note the max drawdown of -29.07%, indicating significant volatility during downturns. This performance, while promising, should be compared to relevant benchmarks, such as the S&P 500, to gauge relative success. Past performance highlights the potential for high returns but also underscores the importance of risk management. Diversifying across asset classes or geographies could help mitigate similar drawdowns in the future, providing more stability during market fluctuations.

Projection Info

Monte Carlo simulations project an optimistic future for this portfolio, with an annualized return of 21.90%. These simulations use historical data to estimate potential outcomes, but remember, they are not guarantees. The projections show a wide range of potential end values, indicating uncertainty and the inherent risks of relying on past data. While the median projection is highly positive, it's wise to prepare for less favorable scenarios. Regularly reviewing and adjusting the portfolio can help align it with changing market conditions and personal investment goals, ensuring it remains on track.

Asset classes Info

  • Stocks
    100%

The portfolio is entirely composed of stocks, with no allocation to bonds or other asset classes. While this focus on equities aligns with a growth strategy, it also increases exposure to market volatility. In contrast, diversified portfolios typically include a mix of asset classes to balance risk and return. By introducing bonds or alternative investments, you could reduce volatility and improve long-term stability. This shift could also enhance diversification, providing a buffer during equity market downturns and offering more consistent returns over time.

Sectors Info

  • Technology
    44%
  • Consumer Discretionary
    11%
  • Telecommunications
    10%
  • Financials
    9%
  • Health Care
    7%
  • Industrials
    6%
  • Consumer Staples
    4%
  • Energy
    3%
  • Basic Materials
    2%
  • Utilities
    1%
  • Real Estate
    1%

Technology dominates the portfolio, comprising 44% of the total allocation. This concentration could lead to higher volatility, especially during periods of tech sector instability or regulatory changes. While tech has been a strong performer, it's crucial to consider the potential risks of such a heavy reliance on one sector. Diversifying into underrepresented sectors, like healthcare or industrials, could reduce risk and improve resilience against sector-specific downturns. Balancing sector exposure can help achieve a more stable performance through different economic cycles.

Regions Info

  • North America
    97%
  • Asia Developed
    1%
  • Europe Developed
    1%

The portfolio's geographic exposure is overwhelmingly concentrated in North America, at 97%. This lack of international diversification may increase vulnerability to U.S. market-specific risks. In comparison, a more balanced portfolio might include significant allocations to Europe, Asia, or emerging markets. Expanding geographic exposure can enhance diversification, providing opportunities for growth in different economic environments and reducing reliance on a single region. This approach can also capture potential growth in emerging markets, which may offer higher returns over time.

Market capitalization Info

  • Mega-cap
    48%
  • Large-cap
    30%
  • Mid-cap
    12%
  • Small-cap
    6%
  • Micro-cap
    5%

The portfolio is heavily weighted toward mega and big-cap stocks, which together make up 78% of the allocation. This focus on larger companies provides stability and liquidity but may limit exposure to the growth potential of smaller firms. A more balanced allocation across market capitalizations could enhance diversification and capture opportunities in mid-cap and small-cap stocks, which often exhibit higher growth potential. Adjusting the allocation to include a broader range of market caps may improve the portfolio's overall risk-return profile.

Redundant positions Info

  • Invesco NASDAQ 100 ETF
    Schwab U.S. Large-Cap Growth ETF
    High correlation

The portfolio contains highly correlated assets, particularly the Invesco NASDAQ 100 ETF and Schwab U.S. Large-Cap Growth ETF. High correlation means these assets tend to move together, reducing diversification benefits. In downturns, this could amplify losses as correlated assets fall simultaneously. To enhance diversification, consider replacing one of these ETFs with an asset that has a lower correlation to the rest of the portfolio. This change could improve risk management by spreading exposure across more independent assets, reducing the impact of market volatility.

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 seeks the best possible risk-return ratio. Currently, the portfolio's high correlation between certain assets limits diversification benefits. By adjusting the allocation among existing assets or introducing new ones, you can potentially achieve a more efficient balance. This optimization doesn't necessarily mean adding new asset types but rather reallocating within the current set to improve returns for the same level of risk. Regular reviews can help maintain this efficiency over time.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.60%
  • Invesco NASDAQ 100 ETF 0.60%
  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • VanEck Semiconductor ETF 0.40%
  • Vanguard S&P 500 ETF 1.20%
  • Weighted yield (per year) 0.88%

The portfolio's dividend yield is relatively low at 0.88%, reflecting its growth-oriented focus. While dividends can provide a steady income stream, growth investors often prioritize capital appreciation. However, incorporating higher-yielding assets could enhance income without sacrificing growth potential. Balancing between growth and income can provide a more stable return profile, especially during periods of market uncertainty. Reinvesting dividends can also contribute to compounding returns, supporting long-term wealth accumulation.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Invesco NASDAQ 100 ETF 0.15%
  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • VanEck Semiconductor ETF 0.35%
  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.11%

The portfolio's overall costs are commendably low, with a Total Expense Ratio (TER) of 0.11%. Low costs are beneficial for long-term performance, as they minimize the drag on returns. This efficient cost structure aligns well with best practices, ensuring more of the portfolio's gains are retained. While the costs are already optimized, it's essential to regularly review them to ensure they remain competitive. Maintaining low costs supports better long-term outcomes, reinforcing the portfolio's growth objectives.

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