High-risk concentrated portfolio with significant focus on financial services and limited geographical diversity

Report created on Dec 17, 2024

Risk profile Info

7/7
Speculative
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

This portfolio is heavily concentrated, with the majority allocated to a single stock, SoFi Technologies Inc., at 67.71%. The remainder is split among a few ETFs, primarily the Vanguard S&P 500 ETF and Schwab U.S. Large-Cap Growth ETF. This composition indicates a high-risk profile due to the heavy reliance on one company. Diversification is limited, which can be risky if SoFi Technologies underperforms. To mitigate this risk, consider adding more varied assets to balance the portfolio and reduce dependency on a single investment.

Growth Info

Historically, the portfolio has shown a CAGR of 21.26%, which is impressive but comes with a significant max drawdown of -69.64%. This indicates high volatility, meaning the portfolio can experience substantial swings in value. While past performance is not a guarantee of future results, understanding this volatility is crucial. Investors should be prepared for potential downturns and consider if they can withstand such fluctuations. Diversifying into less volatile assets could help stabilize returns over time.

Projection Info

Using Monte Carlo simulations, which project future outcomes based on historical data, the portfolio shows a wide range of potential results. With 1,000 simulations, the median outcome is a 63.3% increase, but the 5th percentile shows a drastic potential loss of -92.58%. This highlights the speculative nature of the portfolio. While simulations can guide potential outcomes, they are not foolproof. Investors should use these projections to understand possible risks and consider adjustments to align with their risk tolerance.

Asset classes Info

  • Stocks
    100%

The portfolio is overwhelmingly composed of stocks, accounting for nearly 100% of its allocation. This lack of diversification across asset classes can expose the portfolio to higher risk, as it is heavily dependent on the stock market's performance. Introducing other asset classes, such as bonds or real estate, might help cushion the impact of market downturns and provide more stable returns. Diversifying across asset classes can also help achieve a more balanced risk-return profile.

Sectors Info

  • Financials
    70%
  • Consumer Staples
    10%
  • Technology
    9%
  • Consumer Discretionary
    3%
  • Health Care
    2%
  • Telecommunications
    2%
  • Industrials
    2%
  • Energy
    1%

The portfolio is heavily weighted toward the financial services sector, with 70.38% of the allocation. This concentration increases the risk exposure to sector-specific downturns. While financial services can offer growth opportunities, relying too heavily on one sector can be risky. To reduce sector-specific risk, consider reallocating some investments to sectors like technology or healthcare, which can provide growth potential and diversification benefits. Balancing sector exposure can lead to a more resilient portfolio.

Regions Info

  • North America
    100%

Geographically, the portfolio is almost entirely focused on North America, with 99.88% of assets allocated there. This lack of international exposure limits the benefits of geographic diversification, which can help mitigate risks associated with economic or political issues in a single region. Expanding investments into developed and emerging markets could provide growth opportunities and reduce reliance on the North American market. Diversifying geographically can enhance the portfolio's resilience against regional downturns.

Redundant positions Info

  • Vanguard S&P 500 ETF
    Schwab U.S. Large-Cap Growth ETF
    High correlation

The portfolio includes highly correlated assets, particularly the Vanguard S&P 500 ETF and Schwab U.S. Large-Cap Growth ETF. High correlation means these assets tend to move in the same direction, reducing the diversification benefits. To improve risk management, consider replacing one of these ETFs with assets that have lower correlation to the rest of the portfolio. This adjustment can help smooth returns and reduce the impact of market volatility on the overall portfolio performance.

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 can potentially be optimized using the Efficient Frontier, which aims to achieve the best possible risk-return ratio. Currently, the portfolio's heavy concentration and high correlation among assets limit its efficiency. By adjusting the allocation to include more diverse and less correlated assets, it may be possible to improve the portfolio's risk-return profile. Optimization does not guarantee returns but can help align the portfolio with the investor's risk tolerance and investment goals.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.50%
  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • Vanguard S&P 500 ETF 1.20%
  • Weighted yield (per year) 0.21%

The portfolio's dividend yield is relatively low, at 0.21%, with the highest yield coming from the Avantis U.S. Small Cap Value ETF at 1.5%. While dividends can provide a steady income stream, this portfolio's focus is clearly on growth rather than income. If income generation is a goal, consider increasing allocations to higher-yielding assets. Balancing growth with income-generating investments can provide both capital appreciation and cash flow, enhancing the overall return potential.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.01%

The total expense ratio (TER) for the portfolio is quite low at 0.01%, with the Vanguard S&P 500 ETF and Schwab U.S. Large-Cap Growth ETF having minimal costs. While keeping costs low is advantageous for long-term returns, it is also important to ensure that low-cost investments align with the overall portfolio strategy. Regularly reviewing and managing costs can help maximize net returns, allowing more of the portfolio's growth to benefit the investor.

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