High Risk Low Diversity Portfolio with Strong U.S. Focus and High Technology 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 suits an investor with a high risk tolerance, seeking growth over stability. Ideal for someone focused on long-term capital appreciation, comfortable with market volatility. Suitable for those with a longer investment horizon, willing to accept potential drawdowns for higher returns. The investor should be open to revisiting and adjusting their strategy as market conditions change.

Positions

  • iShares Core S&P Total U.S. Stock Market ETF
    ITOT - US4642871507
    40.00%
  • Invesco NASDAQ 100 ETF
    QQQM - US46138G6492
    30.00%
  • Avantis® U.S. Small Cap Value ETF
    AVUV - US0250728773
    10.00%
  • Vanguard U.S. Quality Factor
    VFQY - US9219357061
    10.00%
  • Vanguard Extended Market Index Fund ETF Shares
    VXF - US9229086528
    10.00%

The portfolio consists of five ETFs, with a significant concentration in U.S. equities. The largest holding is the iShares Core S&P Total U.S. Stock Market ETF, making up 40% of the portfolio, followed by the Invesco NASDAQ 100 ETF at 30%. This indicates a strong bias towards large-cap U.S. stocks, particularly in technology. While offering growth potential, the portfolio lacks diversification across asset classes and regions. A more balanced approach could provide stability and reduce risk.

Growth Info

Historically, the portfolio has performed well, with a CAGR of 16.21%. However, it experienced a max drawdown of -27.55%, indicating vulnerability during market downturns. The concentration in high-growth sectors like technology may have contributed to the strong returns, but also to the volatility. To mitigate risks, consider diversifying into more stable sectors or asset classes that can provide a buffer during turbulent times.

Projection Info

The Monte Carlo simulation, using 1,000 iterations, projects an annualized return of 18.2% for a hypothetical initial investment. This demonstrates the portfolio's potential for high growth, with a 50th percentile end value of 701.07%. However, the wide range of outcomes, from 92.93% to 1,083.68%, highlights the inherent risk. Monte Carlo simulations account for random market fluctuations, emphasizing the need for diversification to potentially smooth out returns.

Asset classes Info

  • Stocks
    100%
  • Cash
    0%
  • No data
    0%
  • Other
    0%

The portfolio is heavily weighted towards stocks, with 99.7% in equities, and a negligible amount in cash and other assets. This concentration in a single asset class increases risk, particularly in volatile markets. While equities offer growth potential, incorporating bonds or other asset classes could provide diversification and reduce overall risk. A more balanced allocation can help achieve a steadier performance and protect against market downturns.

Sectors Info

  • Technology
    32%
  • Consumer Discretionary
    13%
  • Financials
    12%
  • Industrials
    10%
  • Telecommunications
    9%
  • Health Care
    9%
  • Consumer Staples
    6%
  • Energy
    4%
  • Basic Materials
    3%
  • Real Estate
    2%
  • Utilities
    2%

The sector allocation is dominated by technology, accounting for over 32% of the portfolio. Other significant sectors include consumer cyclicals and financial services. This concentration on tech stocks offers high growth potential but also increases vulnerability to sector-specific downturns. Diversifying into underrepresented sectors like utilities or real estate could enhance stability and provide a more balanced risk-return profile.

Regions Info

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

Geographically, the portfolio is overwhelmingly focused on North America, with 98.5% of the assets in the region. This lack of international exposure limits potential benefits from global diversification. Expanding into other developed and emerging markets can provide exposure to different economic cycles and growth opportunities. A more geographically diverse portfolio can help mitigate regional risks and enhance long-term returns.

Redundant positions Info

  • iShares Core S&P Total U.S. Stock Market ETF
    Invesco NASDAQ 100 ETF
    Vanguard Extended Market Index Fund ETF Shares
    Vanguard U.S. Quality Factor
    High correlation

The portfolio contains highly correlated assets, particularly among the iShares Core S&P Total U.S. Stock Market ETF, Invesco NASDAQ 100 ETF, and others. This high correlation means the assets tend to move in the same direction, increasing risk during market downturns. To reduce correlation and enhance diversification, consider incorporating assets with lower correlation, which can improve risk-adjusted returns and reduce portfolio volatility.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.50%
  • iShares Core S&P Total U.S. Stock Market ETF 1.20%
  • Invesco NASDAQ 100 ETF 0.60%
  • Vanguard U.S. Quality Factor 1.30%
  • Vanguard Extended Market Index Fund ETF Shares 1.10%
  • Weighted yield (per year) 1.05%

The portfolio's overall dividend yield is 1.05%, with the highest yielding asset being the Avantis® U.S. Small Cap Value ETF at 1.5%. While dividends provide a steady income stream, the current yield is relatively low, reflecting the growth-oriented nature of the portfolio. To increase income, consider adding higher-yielding assets. However, balance is key, as focusing too heavily on yield can compromise growth potential.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • iShares Core S&P Total U.S. Stock Market ETF 0.03%
  • Invesco NASDAQ 100 ETF 0.15%
  • Vanguard U.S. Quality Factor 0.13%
  • Vanguard Extended Market Index Fund ETF Shares 0.06%
  • Weighted costs total (per year) 0.10%

The total expense ratio (TER) of the portfolio is 0.1%, which is relatively low and cost-efficient. The iShares Core S&P Total U.S. Stock Market ETF has 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 to maximizing returns over time. Regularly reviewing and optimizing the cost structure can help ensure that expenses do not erode potential gains.

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 optimization chart suggests focusing on diversification rather than optimization due to high asset correlation. To achieve a riskier or more conservative portfolio, consider moving along the efficient frontier by adjusting asset class allocations. Increasing exposure to bonds could create a more conservative portfolio, while adding growth-oriented stocks could make it riskier. Prioritize diversification to enhance stability and long-term returns.

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