High-Risk Growth Portfolio with Low Diversification and Strong Sector Concentration

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 with a high-risk tolerance and a long-term investment horizon. Such an investor is typically focused on growth and is willing to accept significant volatility in pursuit of higher returns. Their primary goal is capital appreciation, and they are comfortable with short-term losses. This type of investor often has a longer time frame, allowing them to weather market downturns and benefit from the potential for substantial gains over time.

Positions

  • Vanguard S&P 500 ETF
    VOO - US9229083632
    50.00%
  • Avantis® U.S. Small Cap Value ETF
    AVUV - US0250728773
    10.00%
  • SPDR® S&P MIDCAP 400 ETF Trust
    MDY - US78467Y1073
    10.00%
  • Vanguard Energy Index Fund ETF Shares
    VDE - US92204A3068
    10.00%
  • Vanguard Financials Index Fund ETF Shares
    VFH - US92204A4058
    10.00%
  • Vanguard Information Technology Index Fund ETF Shares
    VGT - US92204A7028
    10.00%

The portfolio is heavily weighted towards equities, with a significant concentration in the Vanguard S&P 500 ETF at 50%. This lack of diversification means the portfolio is more susceptible to market volatility. Diversification is key to reducing risk in a portfolio, and having a high concentration in a single ETF can lead to significant swings in value. To improve diversification, consider adding assets from different classes, such as bonds or international equities, to balance out the portfolio.

Growth

Historically, the portfolio has performed well with a compound annual growth rate (CAGR) of 15.41%. However, it has also experienced a maximum drawdown of -38.68%, indicating significant volatility. High returns often come with higher risks, and the large drawdown suggests the portfolio is vulnerable to market downturns. To mitigate this risk, incorporating more stable, lower-risk investments could help smooth out returns and provide a buffer during market declines.

Projection

Using a Monte Carlo simulation with 1,000 iterations, the portfolio shows a wide range of potential outcomes. The 5th percentile projection is 48.4%, while the 50th percentile is 636.9%, and the 67th percentile is 1,105.3%. Monte Carlo simulations help understand the range of possible future outcomes by simulating different market conditions. To increase the likelihood of achieving more stable returns, consider diversifying the portfolio further to reduce the impact of market volatility.

Asset classes

  • Stocks
    100%
  • Cash
    0%

The portfolio is almost entirely composed of stocks, with a negligible amount of cash. This high allocation to equities aligns with a high-risk, high-reward investment strategy. While stocks can offer significant growth potential, they also come with increased risk. To reduce overall portfolio risk, consider allocating a portion of the investment to bonds or other fixed-income assets, which can provide more stability and income during market downturns.

Sectors

  • Technology
    27%
  • Financials
    20%
  • Energy
    14%
  • Consumer Discretionary
    9%
  • Industrials
    8%
  • Health Care
    7%
  • Telecommunications
    5%
  • Consumer Staples
    4%
  • Basic Materials
    2%
  • Real Estate
    2%
  • Utilities
    1%

The sector allocation is heavily skewed towards Technology (27.32%), Financial Services (20.06%), and Energy (14.11%). This concentration in a few sectors increases the portfolio's exposure to sector-specific risks. Diversifying across more sectors can help mitigate the impact of downturns in any single industry. Consider spreading investments across a broader range of sectors to reduce the risk associated with sector concentration.

Regions

  • North America
    99%
  • Europe Developed
    1%
  • Latin America
    0%
  • Asia Emerging
    0%
  • Asia Developed
    0%
  • Africa/Middle East
    0%

Geographically, the portfolio is overwhelmingly focused on North America, with 99.06% of assets allocated there. This lack of international exposure means the portfolio is highly dependent on the performance of the U.S. market. To reduce geographic risk, consider adding international equities to the portfolio. Diversifying geographically can help protect against regional economic downturns and provide exposure to growth opportunities in other markets.

Dividends

  • Avantis® U.S. Small Cap Value ETF 1.70%
  • SPDR® S&P MIDCAP 400 ETF Trust 1.20%
  • Vanguard Energy Index Fund ETF Shares 3.00%
  • Vanguard Financials Index Fund ETF Shares 1.80%
  • Vanguard Information Technology Index Fund ETF Shares 0.60%
  • Vanguard S&P 500 ETF 1.30%
  • Weighted yield (per year) 1.48%

The portfolio's dividend yield is not explicitly provided, but given the high allocation to equities, it likely includes some dividend-paying stocks. Dividends can provide a steady income stream and help offset losses during market downturns. To enhance income stability, consider focusing on high-quality dividend-paying stocks or dividend-focused ETFs, which can provide regular income and potentially lower volatility.

Ongoing product costs

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • SPDR® S&P MIDCAP 400 ETF Trust 0.24%
  • Vanguard Energy Index Fund ETF Shares 0.10%
  • Vanguard Financials Index Fund ETF Shares 0.10%
  • Vanguard Information Technology Index Fund ETF Shares 0.10%
  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.09%

The portfolio's total expense ratio (TER) is 0.09%, which is relatively low. Lower costs mean more of the investment returns are retained by the investor. Keeping costs low is crucial for long-term investment success, as high fees can erode returns over time. Continue to monitor and manage investment costs to ensure they remain low, and consider low-cost index funds or ETFs to maintain cost efficiency.

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