A speculative portfolio with concentrated S&P 500 exposure and short tech hedge

Report created on Jan 26, 2025

Risk profile Info

7/7
Speculative
Less risk More risk

Diversification profile Info

1/5
Single-Focused
Less diversification More diversification

Positions

The portfolio is heavily concentrated, with 70% in the Vanguard S&P 500 ETF and 30% in ProShares Short QQQ ETF. This composition is single-focused and speculative, indicating a high-risk appetite. The S&P 500 ETF offers broad exposure to large U.S. companies, while the Short QQQ ETF bets against the tech-heavy Nasdaq-100. The limited diversification across asset types and strategies increases the portfolio's volatility. To mitigate risk, consider introducing more diverse asset classes or reducing the concentration in these two ETFs.

Growth Info

The historical performance shows an extraordinary CAGR of 8,181.68%, but with a massive max drawdown of -95.85%, indicating extreme volatility. This suggests past returns were driven by significant market movements, likely due to the high leverage or speculative positioning. While impressive, such performance is unsustainable and risky. Comparing it to benchmarks like the S&P 500, this volatility is atypical. Investors should be cautious and consider whether the potential for high returns justifies the risk of substantial losses.

Projection Info

The Monte Carlo simulation results are inconclusive, with key percentiles and annualized returns showing as 'nan%'. This indicates data issues or extreme volatility affecting the model's reliability. Monte Carlo simulations use historical data to project future performance, but they have limitations, especially with speculative portfolios. Without clear projections, it's crucial to reassess the portfolio's risk and explore more stable investment strategies. Diversifying could enhance predictability and reduce reliance on speculative bets.

Asset classes Info

  • Cash
    52%
  • Stocks
    40%
  • Other
    6%
  • Bonds
    2%

The portfolio's asset class allocation is skewed, with 52% in cash, 40% in stocks, 6% in other assets, and 2% in bonds. This reflects a conservative reserve in cash but a speculative stance with stocks and short positions. Compared to typical balanced portfolios, there's a lack of diversification, which could lead to missed opportunities in other asset classes. Enhancing allocation to bonds or other stable assets could provide better risk-adjusted returns and a cushion during market downturns.

Sectors Info

  • Technology
    24%
  • Financials
    9%
  • Consumer Discretionary
    8%
  • Health Care
    7%
  • Telecommunications
    7%
  • Industrials
    5%
  • Consumer Staples
    4%
  • Energy
    2%
  • Utilities
    2%
  • Real Estate
    1%
  • Basic Materials
    1%

The sector allocation is concentrated, with technology at 24% and other sectors like financial services and consumer cyclicals underrepresented. This tech-heavy focus can lead to higher volatility, especially during interest rate changes. Compared to common benchmarks, this lack of sector balance increases risk. To achieve a more stable portfolio, consider reallocating to underrepresented sectors such as industrials or consumer defensive, which may offer more consistent returns and reduce dependency on tech performance.

Regions Info

  • North America
    70%

The portfolio is predominantly North American at 70%, with no exposure to Europe or Asia. This geographic concentration limits diversification and exposes the portfolio to regional risks. Compared to global benchmarks, this allocation is narrow. Expanding into other regions, particularly emerging markets, could enhance diversification and capture growth opportunities outside North America. Balancing geographic exposure can mitigate risks associated with regional economic downturns and currency fluctuations.

Market capitalization Info

  • Mega-cap
    33%
  • No data
    30%
  • Large-cap
    24%
  • Mid-cap
    13%

The portfolio is primarily invested in mega-cap stocks at 33%, with no exposure to small-cap stocks. This focus on large companies provides stability but may limit growth potential. Compared to benchmarks, the absence of small-cap exposure reduces diversification. Including small and mid-cap stocks could offer higher growth prospects and improve overall risk-adjusted returns. Diversifying across market capitalizations can balance stability with growth, enhancing the portfolio's resilience to market changes.

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's risk-return profile could be optimized using the Efficient Frontier, which seeks the best possible risk-return ratio. Currently, the high concentration and speculative nature may not align with optimal efficiency. Adjusting allocations between existing assets can enhance efficiency, balancing risk and return. However, optimization is based solely on current assets, not diversification or other goals. Consider reassessing asset weights to achieve a more efficient portfolio that meets investment objectives.

Ongoing product costs Info

  • ProShares Trust - ProShares Short QQQ 0.95%
  • Vanguard Index Funds - Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.31%

The portfolio's total expense ratio (TER) is 0.31%, with the ProShares Short QQQ ETF having a higher cost of 0.95% compared to the Vanguard S&P 500 ETF at 0.03%. While the overall TER is reasonable, the higher cost of the short ETF can erode returns over time. Reducing costs can improve long-term performance. Consider evaluating the necessity of the short position and explore lower-cost alternatives or strategies that align with the investment goals without incurring excessive fees.

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