Portfolio with Balanced Risk and High Potential but Limited Diversification and Overlapping Correlations

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

Balanced Investors

This portfolio suits a balanced investor who seeks high growth potential with moderate risk tolerance. Ideal for those with a medium to long-term investment horizon, it appeals to individuals comfortable with market volatility and focused on capital appreciation. While it offers substantial growth opportunities, it requires an investor willing to accept the potential for significant drawdowns. Such an investor values growth over income, but should consider adding diversification to manage risk.

Positions

  • JPMorgan Nasdaq Equity Premium Income ETF
    JEPQ - US46654Q2030
    32.50%
  • Vanguard S&P 500 ETF
    VOO - US9229083632
    32.50%
  • Schwab U.S. Large-Cap Growth ETF
    SCHG - US8085243009
    30.00%
  • GraniteShares 1.5x Long NVDA Daily ETF
    NVDL - US38747R8271
    2.50%
  • YieldMax NVDA Option Income Strategy ETF
    NVDY - US88634T7744
    2.50%

The portfolio is composed predominantly of ETFs, with a strong focus on large-cap U.S. equities. The largest holdings are the JPMorgan Nasdaq Equity Premium Income ETF and the Vanguard S&P 500 ETF, each occupying 32.5% of the portfolio. The Schwab U.S. Large-Cap Growth ETF follows closely at 30%. Smaller positions include the GraniteShares 1.5x Long NVDA Daily ETF and the YieldMax NVDA Option Income Strategy ETF, each at 2.5%. This composition suggests a focus on growth and income, but with a narrow scope, potentially limiting diversification benefits.

Warning The historical data covers less than 2 years, which reduces the confidence in the calculated values.

Growth Info

Historically, the portfolio has performed exceptionally well, with a compound annual growth rate (CAGR) of 33.56%. However, this high return comes with a maximum drawdown of -17.18%, indicating periods of significant volatility. The performance is concentrated, with 90% of returns occurring over just 20 days. This highlights the portfolio's ability to capture substantial gains in short bursts, but also the risk of sharp declines, necessitating a strong stomach for volatility.

Warning Due to limited historical data, this may show extreme values that are not realistic.

Projection Info

Using a Monte Carlo simulation, the portfolio shows a wide range of potential future outcomes. This simulation, which models various market scenarios, suggests an annualized return of 107.52% across all simulations. The 5th percentile outcome is 46,510.54%, while the median is 827,721.44%, and the 67th percentile reaches 1,864,123.85%. Although these figures are hypothetical, they underscore the portfolio's potential for high returns, albeit with significant risk.

Asset classes Info

  • Stocks
    91%
  • No data
    5%
  • Bonds
    2%
  • Cash
    2%

The portfolio is heavily weighted towards stocks, which make up over 91% of the allocation. The remaining assets are split between bonds, cash, and a small portion classified as 'NotClassified.' This stock-heavy allocation aligns with a growth-focused strategy but may expose the portfolio to market volatility. To balance risk, incorporating more bonds or other fixed-income assets could provide stability and reduce the impact of market downturns.

Sectors Info

  • Technology
    42%
  • Telecommunications
    12%
  • Consumer Discretionary
    12%
  • Health Care
    9%
  • Financials
    7%
  • Industrials
    5%
  • Consumer Staples
    4%
  • Basic Materials
    1%
  • Energy
    1%
  • Utilities
    1%
  • Real Estate
    1%

Sector allocation is concentrated, with technology taking the lead at over 41%, followed by communication services and consumer cyclicals. These sectors are known for growth potential but can also be volatile. Healthcare, financial services, and industrials provide some diversification, but their smaller allocations limit their impact. A more balanced sector allocation could help mitigate sector-specific risks and provide more consistent returns across varying market conditions.

Regions Info

  • North America
    94%
  • Europe Developed
    1%
  • Latin America
    0%
  • Asia Developed
    0%
  • Asia Emerging
    0%

Geographically, the portfolio is overwhelmingly focused on North America, with 93.95% of assets allocated there. This heavy concentration limits exposure to global growth opportunities and increases vulnerability to regional economic downturns. A more diversified geographic allocation could enhance the portfolio's resilience and capitalize on growth in other parts of the world. Exploring opportunities in Europe, Asia, and emerging markets might provide a more balanced global exposure.

Redundant positions Info

  • JPMorgan Nasdaq Equity Premium Income ETF
    Schwab U.S. Large-Cap Growth ETF
    Vanguard S&P 500 ETF
    High correlation
  • GraniteShares 1.5x Long NVDA Daily ETF
    YieldMax NVDA Option Income Strategy ETF
    High correlation

The portfolio contains highly correlated assets, particularly among the large-cap U.S. equity ETFs like JPMorgan, Schwab, and Vanguard. This correlation suggests that these assets tend to move in the same direction, which can amplify both gains and losses. Additionally, the NVDA-focused ETFs are also highly correlated. To reduce risk, consider diversifying into assets with lower correlations, which can help smooth out returns and reduce the portfolio's overall volatility.

Dividends Info

  • JPMorgan Nasdaq Equity Premium Income ETF 9.40%
  • GraniteShares 1.5x Long NVDA Daily ETF 2.20%
  • YieldMax NVDA Option Income Strategy ETF 73.40%
  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • Vanguard S&P 500 ETF 1.20%
  • Weighted yield (per year) 5.46%

The portfolio's dividend yield stands at 5.46%, driven largely by the YieldMax NVDA Option Income Strategy ETF's substantial yield of 73.4%. While high yields can boost income, they may also indicate higher risk. The JPMorgan ETF contributes a 9.4% yield, while the other ETFs offer more modest dividends. Ensuring a balance between income and growth is crucial, as an overreliance on high-yield assets may expose the portfolio to increased volatility and potential capital erosion.

Ongoing product costs Info

  • JPMorgan Nasdaq Equity Premium Income ETF 0.35%
  • GraniteShares 1.5x Long NVDA Daily ETF 1.15%
  • YieldMax NVDA Option Income Strategy ETF 1.01%
  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.19%

The portfolio's total expense ratio (TER) is 0.19%, which is relatively low and favorable for long-term growth. However, the GraniteShares and YieldMax ETFs have higher individual expense ratios, at 1.15% and 1.01% respectively. These costs can erode returns over time, especially if these positions do not perform as expected. Keeping an eye on these costs and considering lower-cost alternatives might help improve net returns, while maintaining the portfolio's desired exposure.

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 portfolio appears suboptimal due to overlapping and highly correlated assets, which can limit diversification benefits. The efficient frontier concept suggests that an optimal portfolio maximizes returns for a given level of risk. Currently, the portfolio's asset correlations and sector concentration may prevent it from achieving this balance. To enhance optimization, consider diversifying asset classes and sectors, which could help achieve a more efficient risk-return profile and better align with the efficient frontier.

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