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.
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.
Growth Investors
This portfolio is suitable for aggressive investors with a high-risk tolerance, aiming for significant capital appreciation. These investors are likely focused on long-term growth and can withstand substantial market fluctuations. Their investment horizon is typically long-term, allowing them to ride out market volatility. This type of investor is less concerned with income generation and more focused on maximizing returns through high-growth assets.
The portfolio consists predominantly of U.S. equity ETFs, with a heavy concentration in the iShares Core S&P Total U.S. Stock Market ETF and the Invesco NASDAQ 100 ETF. This indicates a strong preference for broad market exposure and high-growth sectors. However, the lack of diversification can pose risks in volatile market conditions. A more diversified approach could potentially reduce these risks and provide more stable returns over time.
Historically, this portfolio has shown a strong performance with a CAGR of 9.8%. However, it also experienced a significant maximum drawdown of -27.55%, indicating vulnerability during market downturns. This performance suggests a high-risk, high-reward strategy. To mitigate the impact of future market downturns, it might be wise to consider incorporating more stable, low-volatility assets into the portfolio.
Using a Monte-Carlo simulation with 1,000 iterations, the portfolio shows a wide range of potential outcomes. The 5th percentile projects a -76.1% return, while the 50th percentile projects an 88.41% return, and the 67th percentile projects a 206.64% return. This simulation highlights the portfolio's high volatility and potential for both significant gains and losses. To better manage risk, consider balancing the portfolio with assets that have lower volatility.
The portfolio is almost entirely composed of stocks, with a negligible amount in cash and other asset classes. This high equity concentration aligns with a growth-oriented strategy but also increases exposure to market fluctuations. Diversifying into bonds or other asset classes could help cushion the portfolio against market volatility and provide more consistent returns.
The sector allocation is heavily skewed towards technology, which makes up 31.72% of the portfolio. Other significant sectors include Consumer Cyclicals, Financial Services, and Industrials. While tech stocks have high growth potential, their volatility can impact overall portfolio stability. A more balanced sector allocation can help mitigate sector-specific risks and provide more stable returns.
Geographically, the portfolio is overwhelmingly concentrated in North America, which accounts for 98.39% of the holdings. This lack of geographic diversification exposes the portfolio to regional market risks. Including more international assets could help spread risk and potentially enhance returns by tapping into growth opportunities in other regions.
The portfolio's focus on growth stocks means that the dividend yield is likely low. While growth stocks can offer substantial capital appreciation, they typically pay lower dividends. For investors seeking income, incorporating dividend-paying stocks or income-generating assets could provide a more balanced approach.
The portfolio's total expense ratio (TER) is relatively low at 0.1%, which is advantageous for long-term growth as it minimizes the impact of fees on returns. Keeping investment costs low is crucial for maximizing net returns. However, always review the expense ratios regularly to ensure they remain competitive and aligned with investment goals.
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