High-Risk Growth Portfolio with Limited Diversification and Heavy Tech Exposure

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 an aggressive investor who is comfortable with high levels of risk and aims for substantial long-term growth. Such an investor likely has a long investment horizon and can tolerate significant market fluctuations. Their primary goal is capital appreciation rather than income generation, and they are willing to endure short-term volatility for potential high returns.

Positions

  • Invesco NASDAQ 100 ETF
    QQQM - US46138G6492
    50.00%
  • Vanguard S&P 500 ETF
    VOO - US9229083632
    50.00%

The portfolio consists of two ETFs: Invesco NASDAQ 100 ETF and Vanguard S&P 500 ETF, each making up 50% of the total allocation. This results in a high concentration in large-cap U.S. stocks. While both ETFs are well-regarded and offer exposure to top-performing companies, the lack of diversification could increase vulnerability to market volatility. A more balanced approach might include additional asset classes to mitigate risk.

Growth

Historically, the portfolio has shown strong performance with a compound annual growth rate (CAGR) of 12.93%. However, it also experienced a significant maximum drawdown of -29.62%, indicating susceptibility to market downturns. This performance suggests high potential returns, but also a high level of risk. To better weather market fluctuations, a more diversified portfolio might be advisable.

Projection

Using a Monte-Carlo simulation with 1,000 iterations, the projected annualized return is 15.16%. The simulation shows a wide range of potential outcomes, with the 5th percentile at 63.04% and the 67th percentile at 742.43%. This indicates substantial variability, reinforcing the portfolio's high-risk, high-reward nature. Diversifying into less correlated assets could help stabilize future returns.

Asset classes

  • Stocks
    100%
  • Cash
    0%

The portfolio is heavily skewed towards stocks, with 99.90% in equities and a negligible 0.10% in cash. This extreme concentration in a single asset class exposes the portfolio to significant market risk. Incorporating bonds or other asset classes could provide more stability and reduce overall risk.

Sectors

  • Technology
    40%
  • Telecommunications
    12%
  • Consumer Discretionary
    12%
  • Health Care
    9%
  • Financials
    7%
  • Industrials
    6%
  • Consumer Staples
    6%
  • Energy
    2%
  • Basic Materials
    2%
  • Utilities
    2%
  • Real Estate
    1%

Sector allocation is dominated by Technology at nearly 40%, followed by Communication Services and Consumer Cyclicals. While these sectors have performed well historically, their high concentration increases sector-specific risk. Adding exposure to underrepresented sectors like Utilities or Real Estate could enhance diversification and reduce volatility.

Regions

  • North America
    98%
  • Europe Developed
    1%
  • Asia Emerging
    0%
  • Latin America
    0%
  • Asia Developed
    0%

Geographically, the portfolio is overwhelmingly concentrated in North America, accounting for over 98% of the allocation. This lack of geographic diversification makes the portfolio vulnerable to regional economic downturns. Including international stocks from Europe, Asia, and other regions could provide a hedge against U.S. market risks.

Dividends

  • Invesco NASDAQ 100 ETF 0.70%
  • Vanguard S&P 500 ETF 1.40%
  • Weighted yield (per year) 1.05%

The portfolio's dividend yield is not specified, but given the high concentration in growth-oriented ETFs, the yield is likely to be modest. While growth stocks can offer substantial capital appreciation, incorporating dividend-paying stocks could provide a steady income stream and reduce overall portfolio volatility.

Ongoing product costs

  • Invesco NASDAQ 100 ETF 0.15%
  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.09%

The portfolio has a low total expense ratio (TER) of 0.09%, which is commendable. Low costs are crucial for long-term investment success as they ensure more of the returns are retained. Maintaining low fees while seeking diversification will be key to optimizing portfolio performance.

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