High Risk Growth Portfolio with Low Diversification and Strong North American 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 is suitable for aggressive investors with a high-risk tolerance seeking significant capital growth. Ideal for those with long investment horizons, they are willing to endure short-term volatility for potential high returns. These investors prioritize growth over income and are comfortable with concentrated positions in equities. They understand the risks associated with market fluctuations and are prepared to hold through downturns. Their primary goal is wealth accumulation, often for retirement or long-term financial objectives.

Positions

  • Vanguard S&P 500 ETF
    VOO - US9229083632
    60.00%
  • Avantis® U.S. Small Cap Value ETF
    AVUV - US0250728773
    20.00%
  • Pacer US Cash Cows 100 ETF
    COWZ - US69374H8815
    10.00%
  • Invesco S&P MidCap Quality ETF
    XMHQ - US46137V4721
    10.00%

The portfolio is heavily concentrated in U.S. equities, with a significant allocation to the Vanguard S&P 500 ETF, making up 60% of the portfolio. This suggests a strong reliance on large-cap U.S. stocks. The remaining 40% is divided among three other U.S.-focused ETFs, with a tilt towards small-cap and mid-cap stocks. Such concentration may lead to less stability during market downturns. To enhance diversification, incorporating different asset classes or international stocks could mitigate risk and provide more balanced growth potential.

Growth

Historically, the portfolio has shown a strong performance with a CAGR of 16.34%. However, it's important to note the maximum drawdown of -37.02%, indicating significant volatility. The returns are concentrated, with 90% of the performance coming from just 17 days. This volatility reflects the high-risk nature of the portfolio, which can lead to substantial gains but also significant losses. Maintaining a long-term perspective and being prepared for short-term fluctuations is crucial for managing risk and capitalizing on growth opportunities.

Projection

Using a Monte Carlo simulation with 1,000 iterations, the portfolio's future performance was modeled. The 50th percentile projection shows an end value of 882.85%, while the 67th percentile reaches 1,396.34%. The high number of simulations with positive returns (997) suggests a favorable outlook, but the wide range of potential outcomes highlights the inherent uncertainty. Monte Carlo simulations provide insights into possible future scenarios, underscoring the importance of maintaining a diversified portfolio to navigate different market conditions.

Asset classes

  • Stocks
    100%
  • Cash
    0%

The portfolio is overwhelmingly invested in stocks, with a negligible portion in cash. Such a high allocation to equities aligns with a growth-focused strategy but also increases exposure to market volatility. Diversifying into other asset classes, like bonds or commodities, could provide a buffer against stock market downturns and reduce overall portfolio risk. A more balanced asset allocation can help achieve a smoother ride with potentially more stable returns over time.

Sectors

  • Technology
    22%
  • Financials
    14%
  • Consumer Discretionary
    13%
  • Industrials
    13%
  • Health Care
    9%
  • Energy
    8%
  • Telecommunications
    6%
  • Consumer Staples
    6%
  • Basic Materials
    5%
  • Real Estate
    2%
  • Utilities
    1%

The portfolio is diversified across several sectors, with the largest allocations in Technology, Financial Services, and Consumer Cyclicals. However, it lacks significant exposure to Real Estate and Utilities, which could offer stability during market volatility. While sector diversification is evident, the portfolio's heavy reliance on certain sectors may lead to increased risk if those sectors underperform. Balancing sector exposure can enhance resilience and reduce vulnerability to sector-specific downturns.

Regions

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

Geographically, the portfolio is heavily concentrated in North America, with over 99% of the allocation in this region. This lack of international diversification may expose the portfolio to regional economic risks and limit opportunities for growth in other markets. Expanding geographic exposure by investing in international equities could enhance diversification and potentially capture growth in emerging markets. A more globally diversified portfolio can help mitigate regional risks and tap into broader economic trends.

Redundant positions

  • Avantis® U.S. Small Cap Value ETF
    Pacer US Cash Cows 100 ETF
    High correlation
  • Invesco S&P MidCap Quality ETF
    Pacer US Cash Cows 100 ETF
    High correlation

The portfolio exhibits high correlation among its assets, particularly between certain ETFs, which may lead to similar performance patterns during market fluctuations. High correlation can amplify risk, as assets tend to move in the same direction. Reducing correlation by including assets that behave differently, such as bonds or alternative investments, can provide a hedge against market volatility. A diversified portfolio with low correlation between assets can offer more consistent returns and reduced overall risk.

Dividends

  • Avantis® U.S. Small Cap Value ETF 1.60%
  • Pacer US Cash Cows 100 ETF 1.90%
  • Vanguard S&P 500 ETF 1.30%
  • Invesco S&P MidCap Quality ETF 4.90%
  • Weighted yield (per year) 1.78%

The portfolio's dividend yield is not specified, but given its growth-oriented nature, it likely prioritizes capital appreciation over income generation. While dividends can provide a steady income stream, growth portfolios often reinvest profits to fuel further growth. If income is a priority, incorporating dividend-paying stocks or funds could enhance the portfolio's yield. Balancing growth and income objectives can create a well-rounded portfolio that meets both short-term and long-term financial goals.

Ongoing product costs

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Pacer US Cash Cows 100 ETF 0.49%
  • Vanguard S&P 500 ETF 0.03%
  • Invesco S&P MidCap Quality ETF 0.25%
  • Weighted costs total (per year) 0.14%

The portfolio's total expense ratio (TER) is 0.14%, which is relatively low, reflecting efficient cost management. Low costs are crucial for maximizing net returns, especially over the long term. The Vanguard S&P 500 ETF, with the lowest expense ratio of 0.03%, contributes significantly to keeping overall costs down. Monitoring and minimizing investment costs can enhance portfolio performance. Regularly reviewing expense ratios and considering low-cost alternatives can help maintain a cost-effective investment strategy.

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