High Risk Growth Portfolio with Low Diversity and Strong Technology Focus

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 with a high risk tolerance and a long-term investment horizon. Such investors seek substantial capital appreciation and are willing to endure significant volatility and potential drawdowns. They typically have a strong focus on technology and growth sectors, aiming to capitalize on emerging market trends. This investor is less concerned with generating immediate income and more focused on maximizing long-term wealth. A willingness to accept short-term fluctuations and a commitment to a long-term strategy are key characteristics of this investor type.

Positions

  • Invesco QQQ Trust
    QQQ - US46090E1038
    36.44%
  • Vanguard Total Stock Market Index Fund ETF Shares
    VTI - US9229087690
    19.01%
  • Vanguard S&P 500 ETF
    VOO - US9229083632
    14.16%
  • Invesco Aerospace & Defense ETF
    PPA - US46137V1008
    11.53%
  • Extra Space Storage Inc
    EXR - US30225T1025
    9.90%
  • Textron Inc
    TXT - US8832031012
    3.26%
  • Palantir Technologies Inc
    PLTR - US69608A1088
    2.97%
  • Invesco NASDAQ 100 ETF
    QQQM - US46138G6492
    2.72%

The portfolio is heavily concentrated in ETFs, with a significant portion allocated to the Invesco QQQ Trust, which constitutes over 36% of the portfolio. This indicates a strong focus on large-cap tech stocks. The remaining positions include a mix of ETFs and individual stocks, with a notable allocation to the Vanguard Total Stock Market Index Fund and the Vanguard S&P 500 ETF. The limited number of asset classes and high concentration in a few positions suggest low diversification. This could lead to higher volatility, making it crucial to consider additional diversification to mitigate risks.

Growth

Historically, the portfolio has demonstrated robust performance with a compound annual growth rate (CAGR) of 16.13%. However, it has also experienced a significant maximum drawdown of -28.2%, highlighting the potential for substantial losses during market downturns. The portfolio's returns are concentrated in a small number of days, which can result in unpredictable performance. Understanding the historical volatility and drawdown is essential for managing expectations and aligning the portfolio with one's risk tolerance. Consider strategies to reduce the impact of market fluctuations, such as diversifying across different asset classes or sectors.

Projection

A Monte Carlo simulation, which uses random sampling to predict future outcomes, was conducted with 1,000 simulations. The analysis suggests a wide range of potential future returns, with a 5th percentile outcome of 63.45% and a 50th percentile outcome of 1,177.2%. The annualized return across all simulations is 26.72%, indicating potential for substantial growth. However, the variability in outcomes underscores the uncertainty inherent in investing. It's important to prepare for a range of scenarios and adjust the portfolio to align with personal financial goals and risk tolerance, potentially incorporating more stable investments to balance growth opportunities.

Asset classes

  • Stocks
    100%
  • Cash
    0%

The portfolio is overwhelmingly allocated to stocks, with nearly 100% of assets in this class, leaving minimal exposure to other asset classes like bonds or cash. This heavy reliance on equities can lead to increased volatility and risk, especially during market downturns. Diversifying across multiple asset classes can help reduce risk and provide more stable returns over time. Consider introducing fixed-income securities or other alternative investments to achieve a more balanced asset allocation, which can help cushion the portfolio against market fluctuations and provide a more consistent performance.

Sectors

  • Technology
    33%
  • Industrials
    18%
  • Real Estate
    11%
  • Telecommunications
    9%
  • Consumer Discretionary
    9%
  • Health Care
    7%
  • Consumer Staples
    4%
  • Financials
    4%
  • Energy
    2%
  • Basic Materials
    1%
  • Utilities
    1%

The portfolio shows a strong concentration in the technology sector, accounting for over 33% of the total allocation. Other sectors, such as industrials and real estate, are also represented but to a lesser extent. This sector allocation indicates a high exposure to tech-related market movements, which can be both an opportunity and a risk. To mitigate sector-specific risks, it's advisable to diversify across a broader range of industries. This can help protect against downturns in any single sector and provide a more balanced growth potential across different economic cycles.

Regions

  • North America
    99%
  • Europe Developed
    1%
  • Asia Emerging
    0%
  • Latin America
    0%
  • Africa/Middle East
    0%
  • Asia Developed
    0%

Geographically, the portfolio is heavily skewed towards North American investments, comprising over 98% of the total allocation. This lack of international diversification can expose the portfolio to region-specific risks and limit opportunities for growth in other markets. While North America offers a robust market, incorporating a more diverse geographic allocation can help capture growth potential in emerging and developed markets outside the region. Consider exploring international funds or global ETFs to add geographic diversification, which can enhance the portfolio's resilience and growth prospects.

Redundant positions

  • Invesco NASDAQ 100 ETF
    Invesco QQQ Trust
    High correlation
  • Invesco QQQ Trust
    Vanguard S&P 500 ETF
    High correlation
  • Invesco QQQ Trust
    Vanguard Total Stock Market Index Fund ETF Shares
    High correlation
  • Invesco NASDAQ 100 ETF
    Vanguard S&P 500 ETF
    High correlation
  • Invesco NASDAQ 100 ETF
    Vanguard Total Stock Market Index Fund ETF Shares
    High correlation
  • Vanguard S&P 500 ETF
    Vanguard Total Stock Market Index Fund ETF Shares
    High correlation

The portfolio exhibits high correlation among several assets, particularly those within the technology sector ETFs. This means that these assets tend to move in the same direction, which can amplify both gains and losses. High correlation can increase the portfolio's overall risk, especially during market downturns. To reduce correlation risk, consider diversifying into assets with lower correlation to the existing holdings. This can help smooth out returns and reduce the impact of any single asset's performance on the overall portfolio, leading to more stable long-term growth.

Dividends

  • Extra Space Storage Inc 4.00%
  • Invesco Aerospace & Defense ETF 0.60%
  • Invesco QQQ Trust 0.60%
  • Invesco NASDAQ 100 ETF 0.70%
  • Textron Inc 0.10%
  • Vanguard S&P 500 ETF 1.30%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Weighted yield (per year) 1.14%

The portfolio does not emphasize dividend-paying stocks, focusing instead on growth-oriented investments. This approach aligns with the growth classification but may limit income generation for those seeking regular cash flow. While growth stocks can offer substantial capital appreciation, they often reinvest earnings rather than pay dividends. For investors seeking income, consider incorporating dividend-paying stocks or funds to provide a steady income stream. Balancing growth and income investments can help achieve a more comprehensive portfolio strategy that meets both capital appreciation and income needs.

Ongoing product costs

  • Invesco Aerospace & Defense ETF 0.58%
  • Invesco QQQ Trust 0.20%
  • Invesco NASDAQ 100 ETF 0.15%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Weighted costs total (per year) 0.15%

The portfolio's total expense ratio (TER) is relatively low at 0.15%, indicating cost-effective management. The majority of the ETFs have low expense ratios, with the Vanguard funds at just 0.03%. However, the Invesco Aerospace & Defense ETF has a higher expense ratio of 0.58%, which could impact returns over time. Keeping investment costs low is crucial for maximizing net returns. Regularly reviewing and optimizing the cost structure of the portfolio can help enhance long-term performance. Consider alternatives with lower fees to ensure that investment gains are not eroded by high expenses.

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