A tech-heavy growth portfolio with strong historical returns but limited diversification

Report created on Jan 12, 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 evenly split between two ETFs: Invesco NASDAQ 100 and Vanguard Total Stock Market. This results in a concentrated exposure to large-cap U.S. equities. Compared to a typical balanced portfolio, which might include bonds or international stocks, this composition lacks diversification. A more diversified portfolio can help mitigate risks by spreading investments across various asset classes. Consider integrating different asset types to improve diversification and potentially enhance resilience against market volatility.

Growth Info

Historically, the portfolio has shown impressive performance with a CAGR of 15.06%. This indicates strong growth over time, especially when compared to typical market benchmarks. However, the max drawdown of -30.14% highlights significant volatility, which can be concerning during downturns. While past performance is promising, it does not guarantee future results. It's important to be prepared for potential fluctuations by maintaining a long-term perspective and possibly adjusting allocations to reduce volatility.

Projection Info

Using Monte Carlo simulations, the portfolio's future performance shows a wide range of possible outcomes. These simulations use historical data to project potential future returns, with the 50th percentile indicating a 557.28% return. While the projections are optimistic, they are not predictions, and actual results may vary. Given the high variability, consider regular reviews and adjustments to align with evolving market conditions and personal investment goals.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily invested in stocks, with a minuscule cash allocation. This stock-dominant allocation aligns with a growth-focused strategy but may expose the portfolio to higher market volatility. A more balanced approach might include bonds or other asset classes to reduce risk. Diversifying across different asset types can provide a buffer against market downturns and ensure more stable returns over time.

Sectors Info

  • Technology
    41%
  • Consumer Discretionary
    13%
  • Telecommunications
    12%
  • Health Care
    8%
  • Financials
    7%
  • Industrials
    6%
  • Consumer Staples
    5%
  • Energy
    2%
  • Utilities
    2%
  • Basic Materials
    2%
  • Real Estate
    2%

The portfolio is notably concentrated in technology, which comprises over 40% of the allocation. While tech has driven substantial growth, it also introduces sector-specific risks, especially during market corrections or regulatory changes. A more balanced sectoral allocation could reduce this risk. Consider exploring sectors like healthcare or industrials for potential growth opportunities and to enhance diversification.

Regions Info

  • North America
    99%
  • Europe Developed
    1%

With over 98% exposure to North American markets, the portfolio lacks geographic diversification. This concentration can lead to increased vulnerability to regional economic downturns or policy changes. Exploring investments in international markets, such as Europe or Asia, could enhance diversification and provide exposure to different economic cycles, potentially smoothing 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.

Click on the colored dots to explore allocations.

The portfolio can be optimized using the Efficient Frontier, which helps identify the best risk-return trade-off. This involves adjusting the allocation between existing assets to achieve the highest expected return for a given level of risk. While the current assets are growth-oriented, exploring slight adjustments could enhance efficiency, providing better returns without significantly increasing risk.

Dividends Info

  • Invesco NASDAQ 100 ETF 0.60%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Weighted yield (per year) 0.95%

The portfolio's dividend yield is 0.95%, with modest contributions from both ETFs. While growth-focused portfolios often prioritize capital appreciation over income, dividends can provide a steady income stream. If income generation is a goal, consider increasing exposure to dividend-paying stocks or funds, which can offer both growth and income potential.

Ongoing product costs Info

  • Invesco NASDAQ 100 ETF 0.15%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Weighted costs total (per year) 0.09%

With a Total Expense Ratio (TER) of 0.09%, the portfolio is cost-effective. Low costs are crucial for maximizing long-term returns, as high fees can erode gains over time. The current cost structure is aligned with best practices, supporting better net performance. Regularly review costs to ensure they remain competitive, but the current setup is commendable for its efficiency.

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