High Risk Low Diversification Portfolio with Strong Tech Focus and Impressive Historical Performance

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 an investor with a growth-focused mindset, seeking high returns through exposure to large-cap U.S. equities, particularly in technology. Such an investor is comfortable with higher risk and volatility, aiming for long-term capital appreciation. The investor likely has a longer investment horizon, allowing them to weather short-term market fluctuations. They prioritize growth over income, accepting potential drawdowns for the chance of significant gains. Risk tolerance is moderate to high, aligning with the portfolio's aggressive strategy.

Positions

  • Invesco NASDAQ 100 ETF
    QQQM - US46138G6492
    50.00%
  • Vanguard S&P 500 ETF
    VOO - US9229083632
    40.00%
  • Avantis® U.S. Small Cap Value ETF
    AVUV - US0250728773
    10.00%

The portfolio is composed of three ETFs, with a significant 50% allocation to the Invesco NASDAQ 100 ETF, 40% to the Vanguard S&P 500 ETF, and 10% to the Avantis U.S. Small Cap Value ETF. This composition emphasizes a strong focus on large-cap U.S. equities, particularly in the technology sector. The low diversification score indicates a concentrated investment approach. While this setup can lead to significant growth, it also increases vulnerability to market volatility, especially in tech-heavy periods. To enhance diversification, consider adding exposure to different asset classes or sectors to balance risk.

Growth Info

Historically, the portfolio has delivered a commendable compound annual growth rate (CAGR) of 16.89%, although it experienced a maximum drawdown of -27.86%. This indicates that while the portfolio has shown strong returns, it has also faced significant declines. The fact that 90% of the returns are concentrated in just 20 days suggests high volatility. Understanding this volatility is crucial, as it can impact your portfolio's value significantly in the short term. To mitigate potential risks, consider strategies that can reduce volatility, such as diversifying into less correlated assets.

Projection Info

A Monte-Carlo simulation was conducted with 1,000 iterations to project future returns based on historical data. The simulation shows a wide range of possible outcomes, with a 5th percentile return of 199.27% and a 67th percentile return of 1,422.71%. The median expected return stands at 953.71%, indicating a strong potential for growth. However, the variability in outcomes underlines the importance of understanding potential risks. Consider maintaining a balanced risk approach to capitalize on growth while safeguarding against downside scenarios.

Asset classes Info

  • Stocks
    100%
  • Cash
    0%

The portfolio is heavily weighted towards stocks, with 99.94% in equities and a negligible 0.06% in cash. This allocation aligns with a growth-oriented strategy, aiming for high returns through equity investments. However, such a high concentration in stocks can lead to increased risk, particularly during market downturns. To mitigate this, consider incorporating fixed-income securities, such as bonds, to introduce stability and reduce overall portfolio risk. A more balanced asset class distribution can help cushion against market volatility.

Sectors Info

  • Technology
    39%
  • Consumer Discretionary
    13%
  • Telecommunications
    12%
  • Financials
    8%
  • Health Care
    7%
  • Industrials
    7%
  • Consumer Staples
    6%
  • Energy
    3%
  • Basic Materials
    2%
  • Utilities
    2%
  • Real Estate
    1%

The portfolio's sector allocation is dominated by technology, comprising 39.37% of the total. Other significant sectors include consumer cyclicals and communication services. This concentration in tech and related sectors suggests a high reliance on the performance of these industries. While they have driven growth in recent years, sector-specific risks, such as regulatory changes or technological disruptions, can impact returns. To improve resilience, consider diversifying into underrepresented sectors like utilities or real estate, which may offer more stability.

Regions Info

  • North America
    98%
  • Europe Developed
    1%
  • Latin America
    0%
  • Asia Emerging
    0%
  • Asia Developed
    0%
  • Africa/Middle East
    0%

Geographically, the portfolio is heavily concentrated in North America, with 98.34% exposure. Minor allocations exist in Europe Developed, Latin America, and Asia. This focus on North American markets can lead to overexposure to regional economic conditions and currency risks. While U.S. markets have performed well historically, diversifying geographically can help mitigate regional risks and tap into growth opportunities in emerging markets. Consider expanding allocation to international markets to enhance geographic diversification.

Redundant positions Info

  • Invesco NASDAQ 100 ETF
    Vanguard S&P 500 ETF
    High correlation

The portfolio shows high correlation among its assets, particularly between the Invesco NASDAQ 100 ETF and the Vanguard S&P 500 ETF. This means that these assets tend to move in the same direction, increasing the portfolio's overall risk exposure. High correlation can result in amplified losses during market downturns. To reduce correlation risk, consider adding assets with low or negative correlations to the existing holdings. This can help create a more balanced portfolio and smooth out returns over time.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.50%
  • Invesco NASDAQ 100 ETF 0.60%
  • Vanguard S&P 500 ETF 1.20%
  • Weighted yield (per year) 0.93%

The portfolio's dividend yield is relatively modest at 0.93%, reflecting its growth-oriented focus. The Avantis U.S. Small Cap Value ETF contributes the highest yield at 1.5%, while the Invesco NASDAQ 100 ETF offers 0.6%. While dividends provide a steady income stream, the portfolio's emphasis on capital appreciation may limit dividend growth. To enhance income potential, consider increasing exposure to dividend-paying stocks or funds. This can provide a more balanced mix of growth and income, aligning with long-term financial goals.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • 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) is 0.11%, reflecting relatively low costs across its holdings. The Vanguard S&P 500 ETF contributes the lowest cost at 0.03%, while the Avantis U.S. Small Cap Value ETF is the highest at 0.25%. Keeping costs low is essential for maximizing net returns over time. Although the current cost structure is efficient, regularly reviewing expense ratios and exploring lower-cost alternatives can further enhance cost-effectiveness. This ensures more of your investment returns are retained.

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 currently isn't optimized due to high asset correlation, particularly between the Invesco NASDAQ 100 ETF and the Vanguard S&P 500 ETF. The efficient frontier concept suggests that an optimal portfolio offers the highest expected return for a given level of risk. To move closer to this frontier, consider reducing overlap by diversifying into less correlated assets. This can help achieve a more efficient risk-return profile, enhancing potential returns while managing risk effectively. It's crucial to balance growth aspirations with risk management.

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