High Risk and Low Diversity Portfolio with Strong Historical Performance

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 a high-risk, growth-oriented investor. Such an investor is likely focused on long-term capital appreciation and is comfortable with significant market volatility. They may have a longer investment horizon, allowing them to ride out market fluctuations. This type of investor is generally willing to take on higher risk in exchange for the potential of higher returns. They should be prepared for periods of substantial drawdowns and have the financial stability to withstand them.

Positions

  • Avantis® U.S. Small Cap Value ETF
    AVUV - US0250728773
    12.50%
  • Chevron Corp
    CVX - US1667641005
    12.50%
  • JPMorgan Chase & Co
    JPM - US46625H1005
    12.50%
  • SPDR® S&P MIDCAP 400 ETF Trust
    MDY - US78467Y1073
    12.50%
  • Invesco Aerospace & Defense ETF
    PPA - US46137V1008
    12.50%
  • Visa Inc. Class A
    V - US92826C8394
    12.50%
  • Vanguard Information Technology Index Fund ETF Shares
    VGT - US92204A7028
    12.50%
  • Health Care Select Sector SPDR® Fund
    XLV - US81369Y2090
    12.50%

The portfolio consists of eight different positions, each holding a 12.5% allocation. It includes a mix of ETFs and individual stocks, with a primary focus on U.S. equities. The low diversification score suggests that the portfolio is heavily concentrated in a few sectors and asset classes. This lack of diversification could expose the portfolio to higher volatility and risk. To mitigate this, consider adding more varied asset classes and sectors to balance out the risk.

Growth

Historically, the portfolio has shown a Compounded Annual Growth Rate (CAGR) of 14.46%, which is quite impressive. However, it also experienced a maximum drawdown of -39.66%, indicating significant volatility. This kind of performance is typical for a high-risk, high-reward portfolio. While the returns are attractive, the potential for large losses should be a consideration. To manage this, think about incorporating more stable, low-volatility assets.

Projection

Using a Monte Carlo simulation with 1,000 runs, the portfolio's future performance was projected. The median result showed an annualized return of 18.86%, with the 5th percentile at 11.43% and the 67th percentile at 998.05%. This wide range of outcomes highlights the uncertainty and risk involved. Monte Carlo simulations provide a range of possible outcomes, helping to understand potential future performance. To optimize, consider periodic rebalancing based on market conditions.

Asset classes

  • Stocks
    100%
  • Cash
    0%

The portfolio is almost entirely composed of stocks, with a minuscule 0.078% allocation in cash. This heavy reliance on equities contributes to its high-risk profile. While stocks can offer high returns, they also come with significant volatility. Diversifying into other asset classes like bonds or real estate could reduce risk and provide more stable returns. Adding fixed-income assets can act as a buffer during market downturns.

Sectors

  • Financials
    30%
  • Industrials
    16%
  • Technology
    16%
  • Energy
    15%
  • Health Care
    14%
  • Consumer Discretionary
    4%
  • Basic Materials
    2%
  • Consumer Staples
    1%
  • Real Estate
    1%
  • Telecommunications
    0%
  • Utilities
    0%

Sector allocation is concentrated, with Financial Services, Industrials, and Technology making up the majority. This concentration increases exposure to sector-specific risks. For example, a downturn in the financial sector could disproportionately impact the portfolio. Diversifying across more sectors could help spread risk. Including sectors like Utilities or Consumer Staples, which are generally more stable, could balance the portfolio.

Regions

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

The portfolio is overwhelmingly invested in North American assets, with a small fraction allocated to other regions like Europe and Asia. This geographic concentration increases exposure to regional economic and political risks. Diversifying into international markets could provide better risk management and potential growth opportunities. Consider adding more international equities to benefit from global economic trends.

Dividends

  • Avantis® U.S. Small Cap Value ETF 1.50%
  • Chevron Corp 3.90%
  • Invesco Aerospace & Defense ETF 0.60%
  • Visa Inc. Class A 0.80%
  • Vanguard Information Technology Index Fund ETF Shares 0.70%
  • Health Care Select Sector SPDR® Fund 1.50%
  • Weighted yield (per year) 1.12%

The portfolio's dividend yield is not provided, but the presence of ETFs and individual stocks suggests some level of dividend income. Dividend-paying stocks can provide a steady income stream, which can be reinvested or used for other purposes. To maximize income, consider focusing on high-dividend-yielding assets. Reinvesting dividends can also enhance long-term growth.

Ongoing product costs

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • SPDR® S&P MIDCAP 400 ETF Trust 0.24%
  • Invesco Aerospace & Defense ETF 0.58%
  • Vanguard Information Technology Index Fund ETF Shares 0.10%
  • Health Care Select Sector SPDR® Fund 0.09%
  • Weighted costs total (per year) 0.16%

The total expense ratio (TER) of the portfolio is 0.16%, which is relatively low. Lower costs mean more of the returns are kept by the investor, enhancing overall performance. Keeping investment costs low is crucial for long-term success. To maintain cost efficiency, continue to monitor expense ratios and consider low-cost investment options.

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