Growth-Focused Portfolio with High Risk and Moderate Diversification Featuring Diverse Sectors and Asset Classes

Report created on Jul 12, 2024

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.

Positions

The portfolio is heavily weighted towards ETFs, with a substantial 50.9% allocation in the Vanguard S&P 500 ETF. This indicates a strong focus on large-cap U.S. equities. Additionally, the inclusion of Vanguard Total Stock Market Index Fund ETF Shares and Schwab U.S. Dividend Equity ETF further diversifies the U.S. market exposure. The presence of ProShares Bitcoin Strategy ETF introduces an alternative asset class, adding a speculative element. Overall, the portfolio shows a growth-oriented approach with a mix of equity and alternative investments, but it could benefit from increased diversification to balance risk.

Growth Info

With a historical CAGR of 11.39%, the portfolio has demonstrated strong growth potential. However, the max drawdown of -26.44% highlights the volatility and risk associated with the current allocation. The fact that 90% of returns are concentrated in just 10 days suggests that the portfolio's performance is heavily influenced by market timing, which can be unpredictable. This performance pattern underscores the importance of maintaining a long-term perspective and being prepared for fluctuations. A more balanced allocation could potentially reduce volatility and improve consistency in returns over time.

Projection Info

Using a Monte Carlo simulation, which involves running numerous possible future scenarios, the portfolio's forward projection shows a median annualized return of 9.06%. While the 50th percentile suggests a positive outcome, the 5th percentile indicates a potential loss of -87.68%. This wide range of outcomes highlights the portfolio's riskiness. The simulation results emphasize the need for a risk management strategy and possibly a more diversified approach to mitigate extreme downside scenarios. Staying informed and regularly reviewing the allocation can help in making data-driven adjustments.

Asset classes Info

  • Stocks
    94%
  • Cash
    3%
  • Other
    2%
  • No data
    1%

The portfolio is predominantly composed of stocks, accounting for 93.9% of the allocation, with a small portion in cash and other assets. This heavy tilt towards equities aligns with a growth-oriented strategy but increases exposure to market volatility. While stocks offer the potential for higher returns, they also come with higher risks. Incorporating a broader mix of asset classes, such as bonds or real estate, could provide a buffer against market swings and enhance risk-adjusted returns. A more diversified asset class allocation can contribute to a more resilient portfolio.

Sectors Info

  • Technology
    33%
  • Financials
    12%
  • Consumer Discretionary
    11%
  • Health Care
    10%
  • Industrials
    7%
  • Telecommunications
    7%
  • Consumer Staples
    6%
  • Energy
    4%
  • Utilities
    2%
  • Real Estate
    2%
  • Basic Materials
    2%

The portfolio is heavily concentrated in the technology sector, which represents 32.6% of the allocation. This focus on tech stocks aligns with the growth objective but also increases vulnerability to sector-specific risks. Other sectors, like financial services and consumer cyclicals, are also represented, providing some diversification. To mitigate sector risk, consider balancing the portfolio by increasing exposure to underrepresented sectors, such as utilities or basic materials. A more evenly distributed sector allocation can help manage risk and capture opportunities across different economic cycles.

Regions Info

  • North America
    88%
  • Asia Emerging
    3%
  • Europe Developed
    2%
  • Asia Developed
    1%

Geographically, the portfolio is heavily skewed towards North America, accounting for 88% of the allocation. This concentration exposes the portfolio to regional risks, such as economic downturns or policy changes in the U.S. While there's some exposure to emerging markets and developed regions, it's minimal. Expanding the geographic allocation to include more international markets could enhance diversification and reduce regional risk. A more global approach can provide exposure to different economic growth drivers and potentially improve long-term returns.

Redundant positions Info

  • Vanguard Total Stock Market Index Fund ETF Shares
    Vanguard S&P 500 ETF
    High correlation

The portfolio contains highly correlated assets, particularly between the Vanguard Total Stock Market Index Fund ETF Shares and the Vanguard S&P 500 ETF. This correlation suggests overlapping exposure, which might not contribute to diversification. High correlation can lead to amplified losses during market downturns. To address this, consider diversifying with assets that have low or negative correlations with the current holdings. This approach can help in reducing portfolio volatility and improving risk-adjusted performance, creating a more balanced investment strategy.

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 current portfolio shows a tendency towards overlapping assets, particularly within the U.S. equity space, which may not fully capitalize on the efficient frontier concept. The efficient frontier represents the set of optimal portfolios offering the highest expected return for a defined level of risk. To achieve a more optimal portfolio, consider diversifying across uncorrelated assets and sectors, potentially incorporating fixed income or alternative investments. This approach can enhance the risk-return profile, ensuring the portfolio is better positioned to achieve long-term financial goals.

Dividends Info

  • Apple Inc 0.40%
  • ProShares Bitcoin Strategy ETF 46.10%
  • JPMorgan Equity Premium Income ETF 7.00%
  • Schwab U.S. Dividend Equity ETF 3.40%
  • VanEck Semiconductor ETF 0.40%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Vanguard Total International Stock Index Fund ETF Shares 3.00%
  • Weighted yield (per year) 4.01%

The portfolio's total dividend yield stands at 4.01%, with contributions from various ETFs and individual stocks. The Schwab U.S. Dividend Equity ETF and JPMorgan Equity Premium Income ETF provide notable yields, enhancing the portfolio's income potential. However, the ProShares Bitcoin Strategy ETF's unusually high yield should be scrutinized, as it may not be sustainable. A focus on sustainable dividend growth can enhance the portfolio's income stability. Balancing growth and yield can provide a more consistent income stream, aligning with both growth and income objectives.

Ongoing product costs Info

  • ProShares Bitcoin Strategy ETF 0.95%
  • JPMorgan Equity Premium Income ETF 0.35%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • VanEck Semiconductor ETF 0.35%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.11%

With a total TER of 0.11%, the portfolio is cost-efficient. The Vanguard ETFs have notably low expense ratios, which helps in maximizing returns by minimizing costs. However, the ProShares Bitcoin Strategy ETF has a relatively high expense ratio of 0.95%, which could erode returns. Keeping costs low is crucial for long-term investment success. Regularly reviewing and optimizing the cost structure can ensure that expenses don't significantly impact overall performance. Prioritizing low-cost investment options while maintaining diversification can enhance net returns.

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