This portfolio has only about 8 months of historical data, based on the youngest asset in the portfolio. Some metrics, projections, and AI insights may be less reliable and should be interpreted with caution.

Balanced Portfolio with High Tech Exposure and Low Diversification Needs Optimization for Better Efficiency

Report created on Jun 8, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

The portfolio is heavily weighted towards ETFs, with a significant 53.56% allocation in the iShares Core S&P 500 ETF. This indicates a strong focus on broad market exposure. Additionally, technology-focused ETFs like the iShares U.S. Technology ETF and iShares Semiconductor ETF account for a substantial part of the portfolio. This composition suggests a preference for growth-oriented investments. However, the presence of individual stocks like Reddit, Inc. and Joby Aviation, albeit small, adds a speculative element. The overall portfolio reflects a balanced risk profile but lacks diversification, primarily concentrating on technology and large-cap stocks.

Growth Info

Historically, the portfolio has performed exceptionally well, with a compound annual growth rate (CAGR) of 26.51%. This impressive performance can be attributed to the strong market returns of the past decade, particularly in the technology sector. However, the portfolio also experienced a maximum drawdown of -11.59%, indicating vulnerability to market downturns. While the high returns are appealing, they come with inherent risks. It’s crucial to consider whether the past performance aligns with future expectations and risk tolerance. To sustain growth, maintaining a balance between high-return potential and risk management is essential.

Projection Info

Using a Monte Carlo simulation, we projected the portfolio's future performance based on historical data. This technique uses random sampling to model potential outcomes, providing a range of possible returns. The median simulation suggests a significant growth potential with a 370.29% return. However, there's a wide variance, with the 5th percentile showing a potential loss of -94.04%. This highlights the portfolio's high volatility and risk. While the upside is attractive, it's important to prepare for potential downturns. Adjusting the portfolio to mitigate extreme risks while maintaining growth potential is advisable.

Asset classes Info

  • Stocks
    100%

The portfolio is almost entirely composed of stocks, with 99.77% allocated to equities and a negligible amount in cash. This indicates a high-risk, high-reward strategy typical of an aggressive investment approach. While equities offer substantial growth potential, they also expose the portfolio to market volatility. Diversifying into other asset classes like bonds or real estate could help reduce risk and provide more stable returns. A balanced allocation across different asset classes can enhance the portfolio's resilience against market fluctuations and contribute to long-term financial goals.

Sectors Info

  • Technology
    46%
  • Telecommunications
    10%
  • Financials
    9%
  • Consumer Discretionary
    9%
  • Health Care
    8%
  • Industrials
    7%
  • Consumer Staples
    4%
  • Energy
    2%
  • Real Estate
    2%
  • Utilities
    2%
  • Basic Materials
    2%

The portfolio is heavily concentrated in the technology sector, which constitutes 46.2% of the total allocation. While this sector has driven significant growth in recent years, such concentration increases vulnerability to sector-specific downturns. Other sectors like communication services and financial services have moderate representation, but the overall sector diversification is limited. A more balanced sector allocation could reduce risk and enhance potential returns. Diversifying into underrepresented sectors can provide stability and capture growth opportunities across different economic cycles.

Regions Info

  • North America
    99%
  • Europe Developed
    1%

Geographically, the portfolio is predominantly focused on North America, with 98.53% of assets allocated there. This regional concentration exposes the portfolio to economic and political risks specific to the U.S. and Canada. While the North American markets have been strong performers, global diversification could reduce regional risks and capture growth in emerging markets. Expanding geographic exposure can enhance the portfolio's resilience and offer new growth avenues. Balancing investments across different regions can help mitigate the impact of localized economic downturns.

Redundant positions Info

  • iShares U.S. Technology ETF
    iShares Core S&P 500 ETF
    iShares Semiconductor ETF
    Vanguard Growth Index Fund ETF Shares
    High correlation

The portfolio contains several highly correlated assets, particularly within the technology-focused ETFs and funds. This means that these assets tend to move in the same direction, limiting diversification benefits. While correlated assets can amplify gains in a rising market, they also increase risk during downturns. Reducing exposure to overlapping assets and introducing less correlated investments could enhance diversification and risk management. A diversified portfolio with low correlations among assets can provide a smoother return profile and reduce the impact of market volatility.

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, addressing the high correlation among assets is crucial. By reducing exposure to overlapping assets, diversification can be improved. Moving along the efficient frontier allows for adjustments in risk and return balance. For a riskier portfolio, one could increase allocation to high-growth sectors. Conversely, a more conservative approach might involve diversifying into bonds or other asset classes. Focusing on achieving a balance between risk and return can lead to a more efficient portfolio, enhancing long-term performance and stability.

Dividends Info

  • iShares Core S&P 500 ETF 1.20%
  • iShares U.S. Technology ETF 0.40%
  • Spirit Airlines Inc 200.00%
  • iShares Semiconductor ETF 0.70%
  • Vanguard Small-Cap Value Index Fund ETF Shares 1.90%
  • Vanguard Value Index Fund ETF Shares 2.20%
  • Vanguard Growth Index Fund ETF Shares 0.50%
  • Weighted yield (per year) 1.14%

The portfolio's dividend yield is modest at 1.14%, with contributions from various ETFs. While dividend income can provide a steady cash flow, the portfolio's focus on growth-oriented investments suggests a preference for capital appreciation over income generation. To enhance income, consider increasing allocation to dividend-paying stocks or funds. However, maintaining a balance between growth and income is crucial to align with long-term financial goals. A well-rounded approach that includes both capital appreciation and income generation can support financial stability and growth.

Ongoing product costs Info

  • iShares Core S&P 500 ETF 0.03%
  • iShares U.S. Technology ETF 0.40%
  • iShares Semiconductor ETF 0.35%
  • Vanguard Small-Cap Value Index Fund ETF Shares 0.07%
  • Vanguard Value Index Fund ETF Shares 0.04%
  • Vanguard Growth Index Fund ETF Shares 0.04%
  • Weighted costs total (per year) 0.10%

With a total expense ratio of 0.1%, the portfolio's costs are relatively low, which is beneficial for long-term returns. Lower costs mean more of the investment returns are retained, contributing to overall performance. However, it's essential to regularly review expense ratios and seek opportunities to reduce costs further. While cost reduction is important, it should not compromise the quality of investments. Ensuring that the portfolio remains cost-effective while maintaining high-quality investments is key to optimizing performance and achieving financial goals.

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