Growth-Oriented Portfolio with High Risk and Tech Focus but Moderate Diversification Limits Potential

Report created on Jul 11, 2024

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

The portfolio is composed primarily of ETFs, with a significant focus on U.S. equities. It allocates 40% to the Vanguard S&P 500 ETF and 30% to the Invesco NASDAQ 100 ETF, indicating a strong preference for large-cap and technology-focused stocks. Smaller allocations to dividend and international ETFs add some balance, but the overall composition leans heavily toward growth. This setup reflects a growth-oriented strategy, aiming for capital appreciation. However, the high concentration in U.S. equities and tech sectors may expose the portfolio to sector-specific risks.

Growth Info

Historically, the portfolio has performed impressively, with a compound annual growth rate (CAGR) of 16.35%. This suggests robust returns over time, driven by the strong performance of U.S. large-cap and tech stocks. However, the portfolio also experienced a maximum drawdown of -18.06%, highlighting its vulnerability to market downturns. The concentrated nature of returns, with just 13 days accounting for 90% of gains, indicates potential volatility. While past performance is promising, it underscores the need for careful risk management to navigate future market fluctuations.

Projection Info

Using a Monte Carlo simulation with 1,000 iterations, the portfolio's future performance shows a wide range of potential outcomes. The median expected growth is 556.55%, with a 67th percentile projection of 826.54%, reflecting strong potential returns. However, the 5th percentile projection of 82.79% highlights the possibility of lower gains. The high number of simulations with positive returns (994) suggests a favorable outlook, but the variability in outcomes emphasizes the importance of diversification to manage risk and achieve more consistent results.

Asset classes Info

  • Stocks
    98%
  • No data
    2%

The portfolio is heavily weighted toward stocks, comprising 98.16% of the total allocation. This focus on equities aligns with the growth-oriented strategy but also increases exposure to market volatility. The minimal presence of other asset classes, such as cash and other investments, limits diversification benefits. For investors seeking to mitigate risk, incorporating a broader range of asset classes could provide more stability. Balancing the equity exposure with fixed income or alternative investments might enhance the portfolio's resilience against market fluctuations.

Sectors Info

  • Technology
    40%
  • Consumer Discretionary
    11%
  • Telecommunications
    11%
  • Health Care
    9%
  • Financials
    8%
  • Industrials
    6%
  • Consumer Staples
    6%
  • Energy
    3%
  • Basic Materials
    2%
  • Utilities
    2%
  • Real Estate
    1%

Sector allocation is heavily skewed towards technology, which makes up 40.26% of the portfolio. This concentration reflects a high growth potential but also exposes the portfolio to sector-specific risks, such as regulatory changes or market shifts. Other sectors, like consumer cyclicals and communication services, provide some diversification but remain secondary. To reduce risk, a more balanced sector allocation could be beneficial. Diversifying across a wider range of sectors might help cushion against downturns in any single industry and provide more consistent returns.

Regions Info

  • North America
    93%
  • Europe Developed
    3%
  • Asia Emerging
    1%
  • Asia Developed
    1%
  • Japan
    1%

Geographically, the portfolio is predominantly focused on North America, particularly the U.S., which constitutes 93.45% of the allocation. This heavy concentration in one region suggests a strong reliance on the U.S. market's performance. While the U.S. equities have historically performed well, this lack of geographical diversification could expose the portfolio to regional economic risks. Incorporating more international exposure could help mitigate these risks and capture growth opportunities in other markets, providing a more balanced and resilient portfolio.

Redundant positions Info

  • Invesco NASDAQ 100 ETF
    JPMorgan Nasdaq Equity Premium Income ETF
    Vanguard S&P 500 ETF
    High correlation

The portfolio contains highly correlated assets, particularly among the Invesco NASDAQ 100 ETF, JPMorgan Nasdaq Equity Premium Income ETF, and Vanguard S&P 500 ETF. This correlation indicates that these assets tend to move in the same direction, reducing diversification benefits. While such alignment can amplify gains in a rising market, it also increases the risk of significant losses during downturns. To enhance diversification, reducing the overlap of correlated assets and introducing investments with lower correlations could improve risk-adjusted returns.

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.

Before optimizing the portfolio, focus on reducing overlap among highly correlated assets, as they offer limited diversification benefits. By addressing this, you can achieve better risk-adjusted returns. Moving along the efficient frontier, you can either increase risk and potential returns by focusing more on growth stocks or decrease risk by incorporating more conservative assets like bonds. This balance can help tailor the portfolio to align with your risk tolerance and financial goals, ensuring a strategy that meets your investment objectives.

Dividends Info

  • JPMorgan Nasdaq Equity Premium Income ETF 9.40%
  • Invesco NASDAQ 100 ETF 0.60%
  • Schwab U.S. Dividend Equity ETF 3.40%
  • iShares Semiconductor ETF 0.70%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total International Stock Index Fund ETF Shares 3.00%
  • Weighted yield (per year) 2.12%

The portfolio has an overall dividend yield of 2.12%, providing a modest income stream. The JPMorgan Nasdaq Equity Premium Income ETF contributes significantly with a 9.4% yield, while others like the Schwab U.S. Dividend Equity ETF and Vanguard Total International Stock Index Fund ETF Shares offer yields around 3-3.4%. This blend of high-yield and growth-focused ETFs offers a balance between income and capital appreciation. For investors seeking higher income, increasing allocations to dividend-focused ETFs might enhance the yield, while maintaining growth potential.

Ongoing product costs Info

  • JPMorgan Nasdaq Equity Premium Income ETF 0.35%
  • Invesco NASDAQ 100 ETF 0.15%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • iShares Semiconductor ETF 0.35%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.12%

The portfolio's total expense ratio (TER) is 0.12%, reflecting a cost-effective investment strategy. The Vanguard S&P 500 ETF and Schwab U.S. Dividend Equity ETF contribute to this low cost with minimal fees. However, higher-cost ETFs like the JPMorgan Nasdaq Equity Premium Income ETF and iShares Semiconductor ETF slightly increase the overall expenses. Keeping costs low is crucial for maximizing net returns. Investors could explore lower-cost alternatives or consider the impact of fees on long-term performance to further optimize the portfolio's cost efficiency.

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