High-Risk Low-Diversity Portfolio with Significant Tech and Energy Exposure

Report created on Jul 10, 2024

Risk profile Info

6/7
Aggressive
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

The portfolio is heavily weighted towards ETFs, with three major positions each comprising roughly 26% of the total value. The remaining positions are individual stocks, with Energy Transfer LP, Apple Inc, and Alphabet Inc making up smaller portions. This composition shows a strong preference for ETFs, which can offer diversification within themselves, but the overall portfolio lacks diversity across different asset classes and sectors.

Growth Info

Historically, the portfolio has underperformed, with a compound annual growth rate (CAGR) of -3.33%. The maximum drawdown of -53.93% indicates significant risk during market downturns. This performance suggests that while the portfolio may have high potential returns, it is also susceptible to substantial losses. Investors need to be prepared for high volatility and potential negative returns over extended periods.

Projection Info

Using a Monte Carlo simulation with 1,000 runs, the portfolio's future performance was projected. The median (50th percentile) outcome showed a loss of -17.69%, while the worst-case (5th percentile) scenario indicated a dramatic -94.95% loss. However, the best-case scenario (67th percentile) showed a potential gain of 87.56%. This wide range of outcomes underscores the high-risk nature of the portfolio, with significant uncertainty in future returns.

Asset classes Info

  • Stocks
    100%

The portfolio is almost entirely composed of stocks, with a negligible amount of cash. This lack of asset class diversification increases the portfolio's risk, as it is heavily dependent on the performance of the stock market. To reduce risk, incorporating other asset classes such as bonds or commodities could provide more stability and reduce overall volatility.

Sectors Info

  • Technology
    30%
  • Telecommunications
    14%
  • Energy
    13%
  • Consumer Discretionary
    9%
  • Health Care
    9%
  • Financials
    8%
  • Consumer Staples
    7%
  • Industrials
    7%
  • Basic Materials
    1%
  • Utilities
    1%
  • Real Estate
    1%

The sector allocation is heavily skewed towards Technology and Communication Services, which together make up over 44% of the portfolio. This concentration increases exposure to sector-specific risks, such as regulatory changes or technological disruptions. To mitigate this risk, diversifying into other sectors like Healthcare, Financial Services, or Consumer Defensive could provide a more balanced exposure.

Regions Info

  • North America
    99%
  • Europe Developed
    1%

Geographically, the portfolio is almost entirely focused on North America, with over 98% allocation. This lack of international exposure can limit growth opportunities and increase vulnerability to region-specific economic downturns. Diversifying into international markets, including Europe and Asia, could provide more opportunities for growth and reduce geographic risk.

Dividends Info

  • Apple Inc 0.40%
  • Energy Transfer LP 7.80%
  • Alphabet Inc Class C 0.10%
  • Invesco NASDAQ 100 ETF 0.70%
  • Schwab U.S. Dividend Equity ETF 3.50%
  • Vanguard S&P 500 ETF 1.30%
  • Weighted yield (per year) 2.12%

The portfolio includes dividend-paying ETFs and stocks, which can provide a steady income stream. However, the overall dividend yield is not specified. Dividend income can help cushion against market downturns and provide a source of passive income. Reviewing the dividend yields and considering high-dividend stocks or ETFs could enhance income generation.

Ongoing product costs Info

  • Invesco NASDAQ 100 ETF 0.15%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.06%

The portfolio's total expense ratio (TER) is relatively low at 0.06%, indicating cost-efficiency. Low costs are beneficial as they do not significantly erode returns over time. Maintaining a low-cost structure is essential for long-term growth. Regularly reviewing and minimizing expenses can help maximize net returns.

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