A growth-focused portfolio with heavy tech exposure and low diversification
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 is best suited for an investor with a high risk tolerance and a long-term investment horizon, who is primarily seeking capital growth. The heavy emphasis on the tech sector and large-cap stocks indicates a strategy geared towards investors confident in the continued growth and dominance of major technology companies. Such investors should be prepared for volatility and significant drawdowns, understanding that high-reward strategies often come with higher risks.
Positions
-
Invesco NASDAQ 100 ETF
QQQM - US46138G6492 70.00% -
Vanguard S&P 500 ETF
VOO - US9229083632 30.00%
This portfolio is heavily weighted towards technology, with 70% in the Invesco NASDAQ 100 ETF and 30% in the Vanguard S&P 500 ETF. This composition indicates a strong focus on growth, given the tech sector's historical performance. However, it also suggests low diversification, as it is concentrated in just two ETFs that have significant overlap in their top holdings, primarily in the tech sector. While this strategy may capitalize on the growth of large tech companies, it exposes the portfolio to sector-specific risks.
Growth
Historically, this portfolio has achieved a Compound Annual Growth Rate (CAGR) of 16.68%, with a maximum drawdown of -31.77%. These figures suggest that while the portfolio has the potential for high returns, it also carries a significant level of risk, as evidenced by the substantial drawdown. The days contributing to 90% of the returns being concentrated in just 19.0 days highlight the portfolio's volatility and the timing risk inherent in such concentrated investments.
Projection
Monte Carlo simulations, using historical data to project future outcomes, indicate a wide range of possible performances for this portfolio, from a 5th percentile outcome of 134.1% to a 67th percentile outcome of 943.0%. While these projections suggest a high potential for growth, they also underscore the uncertainty and risk, particularly given the portfolio's lack of diversification and heavy reliance on the performance of the tech sector.
Asset classes
- Stocks 100%
- Cash 0%
The portfolio is entirely allocated to stocks, with no presence in other asset classes such as bonds or real estate. This allocation supports the portfolio's growth orientation but also increases its risk profile, especially in market downturns. Diversifying across different asset classes could provide a buffer against volatility and reduce overall risk.
Sectors
- Technology 48%
- Telecommunications 14%
- Consumer Discretionary 13%
- Health Care 6%
- Consumer Staples 5%
- Industrials 5%
- Financials 4%
- Utilities 2%
- Basic Materials 1%
- Energy 1%
- Real Estate 1%
With 48% in technology and significant investments in communication services and consumer cyclicals, the sectoral allocation further emphasizes the growth focus. However, this concentration increases susceptibility to sector-specific downturns. Expanding into underrepresented sectors or more defensive sectors like healthcare and consumer defensive could offer more stability.
Regions
- North America 98%
- Europe Developed 1%
- Latin America 0%
- Asia Emerging 0%
- Asia Developed 0%
The geographic allocation is heavily skewed towards North America (98%), with minimal exposure to international markets. This concentration benefits from the robust performance of U.S. equities but limits potential gains from global diversification. Increasing exposure to developed European markets or emerging markets could enhance returns and reduce geographic risk.
Market capitalization
- Mega-cap 53%
- Large-cap 33%
- Mid-cap 13%
- Small-cap 0%
The portfolio's emphasis on mega (53%) and big (33%) cap stocks aligns with its growth and risk profile but overlooks the potential higher growth opportunities and diversification benefits of medium and small-cap stocks. Incorporating a broader range of market capitalizations could improve the risk-return profile.
Dividends
- Invesco NASDAQ 100 ETF 0.50%
- Vanguard S&P 500 ETF 1.20%
- Weighted yield (per year) 0.71%
The portfolio's dividend yield of 0.71% is modest, reflecting its growth orientation over income generation. While reinvesting dividends can contribute to compounding growth, investors seeking regular income might consider assets with higher dividend yields or a dedicated dividend strategy.
Ongoing product costs
- Invesco NASDAQ 100 ETF 0.15%
- Vanguard S&P 500 ETF 0.03%
- Weighted costs total (per year) 0.11%
The portfolio's total expense ratio (TER) of 0.11% is impressively low, which is beneficial for long-term growth as it minimizes the drag on performance. Keeping costs low is crucial for maximizing returns, especially in growth-oriented portfolios where the compound effect of costs can be significant over time.
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 current portfolio's heavy reliance on the tech sector and large-cap stocks suggests room for optimization towards a more efficient risk-return ratio, as per the Efficient Frontier theory. This theory suggests there's a combination of assets that can achieve the highest expected return for a given level of risk. Diversifying across more sectors, asset classes, and geographies could help achieve a more optimal balance.
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