A tech-focused high-risk portfolio with low diversification and strong past performance

Report created on Mar 2, 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 concentrated in individual stocks, with NVIDIA and UnitedHealth Group each occupying 35% of the total allocation. This high concentration in two companies significantly impacts the portfolio's risk profile. In comparison, a more diversified portfolio would spread investments across a wider range of assets. This structure may lead to increased volatility, as the performance heavily depends on these two companies. To mitigate risk, consider diversifying with a broader mix of stocks and asset classes, which could help stabilize returns over time.

Growth Info

Historically, the portfolio has delivered impressive returns, with a Compound Annual Growth Rate (CAGR) of 36.40%. This indicates strong growth, but the maximum drawdown of -59.13% highlights the potential for significant losses. Compared to typical benchmarks, the returns are high but come with elevated risk. It's essential to recognize that past performance doesn't guarantee future results. To manage risk, consider strategies to reduce drawdowns, such as diversifying into lower-risk assets or employing hedging techniques.

Projection Info

The Monte Carlo simulation, which uses historical data to predict potential future outcomes, suggests a wide range of possible returns for this portfolio. With a 50th percentile end value of 2,293.9%, the projections are optimistic, but the 5th percentile shows a much lower potential return of 291.7%. While the majority of simulations predict positive returns, it's crucial to remember that these are based on historical trends and assumptions. Diversifying the portfolio could help manage risk and improve the likelihood of achieving desired outcomes.

Asset classes Info

  • Stocks
    100%

The portfolio is entirely composed of stocks, which limits diversification and increases exposure to market volatility. A more balanced allocation across different asset classes, like bonds or real estate, could provide stability and reduce risk. By diversifying into various asset classes, the portfolio can better withstand market fluctuations and potentially achieve a more consistent performance. Consider incorporating other asset classes to create a well-rounded investment strategy that aligns with long-term financial goals.

Sectors Info

  • Technology
    46%
  • Health Care
    37%
  • Consumer Discretionary
    7%
  • Telecommunications
    7%
  • Financials
    2%
  • Industrials
    1%
  • Consumer Staples
    1%

The portfolio is heavily weighted towards the technology sector, which accounts for 46% of the total allocation. While tech stocks have driven strong returns, they can also be volatile, especially during economic downturns or interest rate hikes. The healthcare sector also holds a significant share at 37%. To mitigate sector-specific risks, consider diversifying into underrepresented sectors like consumer defensive or utilities. This approach can help balance the portfolio and protect against sector-specific downturns.

Regions Info

  • North America
    100%

The portfolio's geographic exposure is entirely concentrated in North America, which limits diversification and increases vulnerability to regional economic fluctuations. By expanding into international markets, such as Europe or Asia, the portfolio can benefit from different economic cycles and reduce regional risk. Diversifying geographically can help capture growth opportunities in emerging markets and provide a buffer against potential downturns in the U.S. economy. Consider broadening geographic exposure to enhance diversification and risk management.

Market capitalization Info

  • Mega-cap
    93%
  • Large-cap
    5%
  • Mid-cap
    2%

The portfolio is predominantly invested in mega-cap stocks, accounting for 93% of the total allocation. While these large companies offer stability and liquidity, they may not provide the same growth potential as smaller companies. A more balanced approach across market capitalizations can enhance diversification and capture growth opportunities in mid and small-cap stocks. By incorporating a mix of large, medium, and small-cap stocks, the portfolio can benefit from different growth dynamics and potentially achieve higher returns.

Redundant positions Info

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

The portfolio contains highly correlated assets, particularly among the ETFs, which can limit diversification benefits. When assets move together, they may not provide the desired risk reduction during market downturns. To improve diversification, consider replacing some of the correlated ETFs with those that have lower correlation to the existing holdings. This strategy can help achieve a more balanced risk profile and enhance the portfolio's ability to weather 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.

While the portfolio has delivered strong returns, there's potential for optimization using the Efficient Frontier concept. This involves adjusting the asset allocation to achieve the best possible risk-return ratio based on current holdings. By focusing on diversification and reducing correlations, the portfolio can move closer to an optimal point on the Efficient Frontier. This approach can help balance risk and return, ensuring the portfolio is well-positioned for future growth while managing potential downsides.

Dividends Info

  • Alphabet Inc Class A 0.40%
  • Microsoft Corporation 0.60%
  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • SPDR® Portfolio S&P 500 ETF 1.30%
  • UnitedHealth Group Incorporated 1.70%
  • Vanguard S&P 500 ETF 1.20%
  • Weighted yield (per year) 0.79%

The portfolio's overall dividend yield is modest at 0.79%, with UnitedHealth Group contributing the highest yield at 1.70%. While dividends can provide a steady income stream, this portfolio's focus on growth stocks results in lower yields. For investors seeking income, consider incorporating higher-yielding stocks or dividend-focused ETFs to balance growth and income objectives. This approach can enhance cash flow and provide stability during periods of market uncertainty.

Ongoing product costs Info

  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • SPDR® Portfolio S&P 500 ETF 0.02%
  • Vanguard S&P 500 ETF 0.03%

The portfolio benefits from low costs, with ETF expense ratios ranging from 0.02% to 0.04%. These low fees help maximize returns by minimizing the drag on performance. Keeping costs low is a positive aspect of the portfolio, as it supports better long-term growth. To maintain this advantage, continue monitoring expense ratios and consider replacing higher-cost investments with comparable lower-cost alternatives when possible. Staying vigilant about costs can contribute to improved overall returns.

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