Growth-Focused Low Diversification Portfolio with High Risk Potential and Strong Historic Performance

Report created on Dec 6, 2024

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

This portfolio consists primarily of ETFs, with a significant 67.5% allocation to the SPDR® Portfolio S&P 500 ETF, and a notable 22.5% in the Fidelity® MSCI Information Technology Index ETF. The remaining 10% is distributed equally across five individual stocks. This composition suggests a focus on broad market exposure with a tech-heavy tilt. While the ETFs provide diversification within themselves, the overall portfolio has low diversification due to the high concentration in a few positions. Increasing the number of sectors or asset classes could enhance diversification and reduce risk.

Growth Info

Historically, this portfolio has demonstrated strong performance with a compound annual growth rate (CAGR) of 16.62%. However, it has also experienced significant volatility, with a maximum drawdown of -31.25%. This indicates that while the portfolio has potential for high returns, it also carries substantial risk. The performance is reliant on a small number of high-return days, emphasizing the importance of timing in this portfolio's success. To mitigate the impact of volatility, consider adjusting the portfolio to include more stable assets that can provide a buffer during market downturns.

Projection Info

A Monte Carlo simulation, which uses random sampling to predict potential future outcomes, suggests a wide range of possible returns for this portfolio. With a hypothetical initial investment, the 5th percentile return is 164.62%, while the 67th percentile return is 1,430.53%. The median simulation shows a 920.3% return, highlighting the portfolio's potential for significant growth. However, the high variability indicates uncertainty and risk. To align with personal risk tolerance, consider adjusting the asset allocation to balance potential returns with acceptable risk levels.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily weighted towards stocks, with 99.9% allocated to equities and a negligible amount in cash. This concentration in a single asset class suggests a high-risk, high-reward strategy focused on capital appreciation. While this approach can yield substantial returns, it also exposes the portfolio to market volatility. To mitigate this risk, consider diversifying into other asset classes such as bonds or real estate, which can provide stability and income during market fluctuations. A more balanced asset allocation could enhance risk-adjusted returns.

Sectors Info

  • Technology
    45%
  • Financials
    11%
  • Consumer Discretionary
    9%
  • Consumer Staples
    8%
  • Industrials
    7%
  • Health Care
    7%
  • Telecommunications
    6%
  • Energy
    2%
  • Utilities
    2%
  • Real Estate
    1%
  • Basic Materials
    1%

The sector allocation reveals a significant bias towards technology, which comprises 44.81% of the portfolio. Other sectors like financial services, consumer cyclicals, and consumer defensive are present but with much lower weights. This concentration in technology can lead to outsized gains during tech booms but also increases vulnerability to sector-specific downturns. A more balanced sector allocation could improve diversification and reduce sector-specific risk. Consider spreading investments across a wider range of sectors to capture growth opportunities while minimizing risk.

Regions Info

  • North America
    99%

Geographically, the portfolio is overwhelmingly concentrated in North America, with 99.42% of assets allocated there. This focus on a single region limits exposure to global growth opportunities and increases vulnerability to regional economic downturns. While North American markets have performed well historically, diversifying into other regions could provide access to emerging markets and potential growth areas. Consider incorporating international investments to achieve a more balanced geographic allocation and reduce reliance on the North American market.

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.

Click on the colored dots to explore allocations.

The portfolio could be optimized for better returns without increasing risk. By adjusting the asset allocation along the efficient frontier, investors can achieve a more balanced risk-return profile. Moving towards a more efficient portfolio involves reallocating assets to maximize expected returns for a given level of risk. To make the portfolio riskier, focus on increasing exposure to high-growth sectors or regions. Conversely, for a more conservative approach, incorporate stable, income-generating assets to reduce volatility and enhance stability.

Dividends Info

  • Fidelity® MSCI Information Technology Index ETF 0.60%
  • Procter & Gamble Company 2.30%
  • SPDR® Portfolio S&P 500 ETF 1.20%
  • Visa Inc. Class A 0.70%
  • Waste Management Inc 1.00%
  • Walmart Inc 0.90%
  • Weighted yield (per year) 1.04%

The portfolio's dividend yield is relatively low at 1.04%, reflecting its growth-oriented nature. While some holdings like Procter & Gamble offer higher yields, the focus on technology and growth stocks generally leads to lower dividend income. For investors seeking income, this portfolio may not meet expectations. To increase dividend income, consider adding higher-yielding assets that can provide steady cash flow. Balancing growth and income can create a more rounded portfolio that supports both capital appreciation and income generation.

Ongoing product costs Info

  • Fidelity® MSCI Information Technology Index ETF 0.08%
  • SPDR® Portfolio S&P 500 ETF 0.02%
  • Weighted costs total (per year) 0.03%

The portfolio's costs are impressively low, with a total expense ratio of just 0.03%. This cost efficiency is largely due to the low expense ratios of the ETFs included. Keeping investment costs low is crucial for maximizing net returns over time. By minimizing fees, more of the portfolio's returns are retained, enhancing overall performance. Maintaining this cost-effective approach while considering portfolio adjustments can help achieve financial goals without unnecessary expenses. Always be mindful of fees when making changes to the portfolio.

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