A growth-focused portfolio with high tech exposure and limited diversification

Report created on Jan 9, 2025

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 weighted towards ETFs, with Invesco QQQ Trust making up 50% of the total. This concentration in a single ETF, particularly in the tech sector, suggests a focus on growth but limits diversification. Typically, a more balanced portfolio might include a mix of stocks, bonds, and ETFs. The current composition leans heavily towards equities, which can increase potential returns but also volatility. Consider diversifying by adding other asset classes, such as bonds or international equities, to mitigate risk and improve stability.

Growth Info

Historically, the portfolio has performed well, with a Compound Annual Growth Rate (CAGR) of 16.01%. This robust growth is impressive compared to general market benchmarks. However, the maximum drawdown of -32.28% indicates significant volatility, which can be unsettling during market downturns. While past performance is not indicative of future results, it highlights the potential for both high returns and high risk. To manage this risk, consider strategies such as periodic rebalancing or incorporating more defensive assets.

Projection Info

Forward projections using Monte Carlo simulations show a wide range of potential outcomes, with a median return of 316.67%. Monte Carlo analysis uses historical data to simulate future performance, considering various market conditions. While the simulations suggest positive outcomes in most cases, the 5th percentile shows a potential loss of -24.31%, emphasizing the inherent risk. It's crucial to be prepared for such volatility and consider adjusting the portfolio to align better with your risk tolerance and investment goals.

Asset classes Info

  • Stocks
    100%

The portfolio is almost entirely invested in stocks, with a tiny fraction in cash. This asset allocation can lead to high returns but also increased volatility. Diversification across different asset classes, such as bonds or alternative investments, can help mitigate risks associated with market fluctuations. A more balanced allocation could provide a cushion during downturns, offering stability and potentially smoothing returns over time.

Sectors Info

  • Technology
    37%
  • Consumer Discretionary
    13%
  • Telecommunications
    12%
  • Real Estate
    10%
  • Health Care
    7%
  • Consumer Staples
    6%
  • Financials
    6%
  • Industrials
    5%
  • Energy
    3%
  • Basic Materials
    1%
  • Utilities
    1%

The portfolio is heavily concentrated in the technology sector, accounting for over 37% of the allocation. While tech stocks have historically driven growth, they are also susceptible to volatility, especially during economic uncertainty or interest rate changes. A well-diversified portfolio typically includes exposure to various sectors to balance risk and return. Consider increasing exposure to underrepresented sectors like energy or utilities to enhance diversification and reduce reliance on tech performance.

Regions Info

  • North America
    99%
  • Europe Developed
    1%

Geographically, the portfolio is predominantly focused on North America, with minimal exposure to other regions. This concentration can limit diversification benefits and expose the portfolio to regional economic risks. Diversifying into international markets can provide exposure to different economic cycles and growth opportunities. Consider increasing allocations to Europe, Asia, or emerging markets to enhance geographic diversification and potentially improve long-term returns.

Redundant positions Info

  • Schwab U.S. Large-Cap Growth ETF
    Invesco QQQ Trust
    High correlation

The portfolio contains highly correlated assets, particularly between Schwab U.S. Large-Cap Growth ETF and Invesco QQQ Trust. High correlation means these assets tend to move in the same direction, reducing diversification benefits. In market downturns, this can lead to larger portfolio losses. To improve diversification, consider replacing one of these assets with an investment that has a lower correlation, thereby reducing overall portfolio risk and enhancing potential stability.

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 could benefit from optimization using the Efficient Frontier, which balances risk and return. This approach identifies the best possible allocation of current assets to maximize returns for a given risk level. By adjusting the proportions of existing assets, you can achieve a more efficient portfolio without necessarily adding new investments. This strategy helps in aligning the portfolio with your risk tolerance and investment goals while maintaining focus on growth.

Dividends Info

  • Orchid Island Capital Inc. 16.90%
  • Invesco QQQ Trust 0.60%
  • Schwab U.S. Dividend Equity ETF 3.60%
  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • Weighted yield (per year) 2.79%

The portfolio's dividend yield is 2.79%, with Orchid Island Capital Inc. contributing a substantial 16.9%. While high dividends can provide steady income, they may also indicate higher risk, especially if reliant on a single stock. Balancing high-yield investments with stable, lower-yield options can provide a more reliable income stream. Evaluating the sustainability of these dividends is crucial to ensure they align with your income needs and risk tolerance.

Ongoing product costs Info

  • Invesco QQQ Trust 0.20%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • Weighted costs total (per year) 0.12%

The portfolio's total expense ratio (TER) is 0.12%, which is relatively low and beneficial for long-term growth. Lower costs mean more of your returns stay in your pocket, compounding over time. However, always be on the lookout for opportunities to minimize expenses further, such as switching to lower-cost funds or negotiating fees. Keeping costs down is a straightforward way to enhance net returns without altering your investment strategy significantly.

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