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A tech-heavy growth-focused portfolio with significant risk and low diversification

Report created on Dec 14, 2024

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

The portfolio is heavily skewed towards technology, with 80% invested in the Technology Select Sector SPDR® Fund. This concentration indicates a strong focus on growth within the technology sector. Additionally, the portfolio includes smaller positions in utilities, consumer cyclicals, and healthcare. Such a composition suggests a high-risk, high-reward strategy, as tech stocks are known for their volatility. Diversification is limited, which can expose the portfolio to sector-specific risks. To mitigate potential downturns, consider diversifying into other sectors or asset classes that can provide stability and reduce overall risk.

Growth Info

Historically, the portfolio has shown impressive growth, with a compound annual growth rate (CAGR) of 24.41%. This suggests that the portfolio has performed well in the past, particularly during periods of technology sector growth. However, the maximum drawdown of -40.83% highlights the significant risk involved, as the portfolio can experience substantial losses during market downturns. While past performance can provide insights, it is not a guarantee of future results. It's essential to balance the pursuit of high returns with risk management strategies to protect against potential losses.

Projection Info

The Monte Carlo simulation projects a wide range of potential outcomes, with an average annualized return of 29.96%. This method uses historical data to simulate various market scenarios, offering a probabilistic view of future performance. While the median simulation suggests strong growth, it's crucial to remember that these projections are based on past trends and may not account for future market changes. To better prepare for uncertainty, consider stress-testing the portfolio against different economic scenarios and adjusting allocations to enhance resilience.

Asset classes Info

  • Stocks
    100%

The portfolio is overwhelmingly invested in stocks, with nearly 100% allocation, which indicates a lack of asset class diversification. While stocks can offer significant growth, they also come with higher volatility. Incorporating other asset classes, such as bonds or real estate, can provide stability and reduce overall risk. By diversifying across asset classes, the portfolio can better withstand market fluctuations and offer more consistent returns over time, aligning with long-term investment goals.

Sectors Info

  • Technology
    89%
  • Utilities
    8%
  • Consumer Discretionary
    1%

With nearly 90% of the portfolio invested in the technology sector, there is a notable concentration risk. While this sector has been a strong performer, it is also susceptible to rapid changes and volatility. The remaining exposure to utilities provides some defensive balance, but it's minimal. Expanding into other sectors, such as healthcare or consumer goods, can help mitigate sector-specific risks and enhance overall portfolio resilience. A more balanced sector allocation can improve stability and potentially smooth returns during market downturns.

Regions Info

  • North America
    93%
  • Europe Developed
    6%
  • Asia Emerging
    1%

The portfolio is predominantly focused on North America, with over 93% geographic allocation. This emphasis can lead to regional risk, especially if the North American markets face economic challenges. Limited exposure to Europe and Asia may restrict the portfolio's ability to capitalize on global growth opportunities. To enhance diversification, consider increasing investments in international markets. A more geographically diverse portfolio can reduce regional risks and tap into growth potential in emerging and developed markets worldwide.

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.

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The portfolio's current allocation could be optimized using the Efficient Frontier to achieve a better risk-return ratio. By adjusting the weightings of existing assets, it's possible to enhance efficiency without altering the overall composition. This involves finding the optimal balance between risk and return, maximizing potential gains while minimizing risk. However, optimization is based on historical data, which may not predict future market conditions. Regularly reviewing and adjusting the portfolio can ensure it remains aligned with investment goals and market dynamics.

Dividends Info

  • ASML Holding NV ADR 0.90%
  • Technology Select Sector SPDR® Fund 0.70%
  • Utilities Select Sector SPDR® Fund 2.80%
  • Yum China Holdings Inc 1.00%
  • Weighted yield (per year) 0.84%

The portfolio's total dividend yield is relatively low at 0.84%, reflecting its growth-oriented strategy. While dividends can provide a steady income stream and buffer against volatility, the current yield suggests limited income generation. To enhance cash flow, consider increasing exposure to dividend-paying stocks or funds. This can provide a more balanced approach, combining growth potential with income generation, which can be particularly beneficial during periods of market uncertainty.

Ongoing product costs Info

  • ARK Innovation ETF 0.75%
  • Technology Select Sector SPDR® Fund 0.09%
  • Utilities Select Sector SPDR® Fund 0.09%
  • Weighted costs total (per year) 0.09%

The portfolio's total expense ratio (TER) is modest at 0.09%, indicating efficient cost management. However, the ARK Innovation ETF carries a higher cost at 0.75%. While higher fees can be justified by superior returns, they can erode long-term gains. To improve cost efficiency, consider evaluating the performance of higher-cost funds and exploring lower-cost alternatives. Reducing expenses can enhance net returns, allowing more of the portfolio's growth to benefit the investor over time.

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