High-Risk Growth Portfolio with Single-Focused Diversification and Strong Historical Performance but Limited Geographic Spread

Report created on Dec 6, 2024

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

1/5
Single-Focused
Less diversification More diversification

Positions

The portfolio is primarily composed of ETFs, with a significant portion allocated to the Vanguard S&P 500 ETF, making up 63.75% of the total. This indicates a strong reliance on the US large-cap market, providing broad exposure to American equities. The portfolio also includes a notable allocation to the Vanguard Information Technology Index Fund ETF Shares, emphasizing a tech-heavy approach. With a small allocation to Grayscale Bitcoin Trust, the portfolio introduces a cryptocurrency component, adding a layer of alternative investment. Overall, the portfolio is single-focused in its diversification, which might limit its ability to mitigate risks associated with market volatility.

Growth Info

Historically, the portfolio has delivered an impressive compound annual growth rate (CAGR) of 20.57%, showcasing its growth-oriented nature. However, this has come with significant volatility, as evidenced by a maximum drawdown of -67.82%. This highlights the potential for substantial losses during market downturns, a common trait for high-risk portfolios. The portfolio's performance is concentrated, with 90% of returns generated in just 33 days. This suggests that timing and market conditions play a critical role in the portfolio's success, underscoring the need for careful monitoring and potentially more diversified strategies to smooth out returns.

Projection Info

Using a Monte Carlo simulation with 1,000 iterations, the portfolio's future performance shows a wide range of potential outcomes. The simulation predicts a 5th percentile return of 97.07% and a 67th percentile return of 4,179.18%, indicating high variability. The median return is projected at 2,202.78%, reflecting the portfolio's growth potential. However, the annualized return across all simulations is 33.09%, suggesting robust long-term growth. This simulation provides a probabilistic view of future returns, helping to understand potential risks and rewards. It's crucial to consider these projections when making decisions to ensure alignment with investment goals and risk tolerance.

Asset classes Info

  • Stocks
    95%
  • Other
    5%

The portfolio is heavily weighted towards stocks, comprising 94.86% of the total allocation, with a minor 5% in other assets, specifically cryptocurrency. This stock-heavy allocation reflects a growth-oriented strategy, aiming for capital appreciation. While stocks offer potential for higher returns, they also bring increased volatility. The small allocation to other assets provides some diversification but is limited in its impact. Balancing stocks with other asset classes like bonds could reduce overall portfolio risk. Evaluating the current mix and considering a more balanced approach might help in achieving a better risk-return profile, especially during market downturns.

Sectors Info

  • Technology
    42%
  • Financials
    10%
  • Consumer Discretionary
    9%
  • Consumer Staples
    8%
  • Health Care
    7%
  • Industrials
    7%
  • Telecommunications
    6%
  • Energy
    2%
  • Utilities
    2%
  • Real Estate
    1%
  • Basic Materials
    1%

The portfolio's sector allocation is predominantly skewed towards technology, comprising 42.14% of the total. This concentration in tech stocks suggests a high-growth strategy but also exposes the portfolio to sector-specific risks. Other sectors like financial services, consumer cyclicals, and healthcare have moderate allocations, providing some diversification. However, sectors like utilities and real estate are underrepresented. Diversifying across a broader range of sectors could mitigate risks associated with sector-specific downturns and enhance stability. Considering a more balanced sector allocation might help in achieving a more resilient portfolio that can withstand various economic cycles.

Regions Info

  • North America
    94%

Geographically, the portfolio is overwhelmingly concentrated in North America, with 94.42% of assets allocated there. This lack of international exposure limits the portfolio's ability to benefit from global economic growth and diversification. Small allocations to Europe Developed, Asia Developed, Latin America, and Africa/Middle East are present but negligible. Expanding geographic diversification could reduce region-specific risks and tap into growth opportunities in emerging markets. A more balanced geographic allocation might provide a hedge against domestic market volatility and enhance potential returns by capturing growth in different regions around the world.

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 optimization chart suggests potential for improvement by shifting along the efficient frontier. Currently, the portfolio's expected return is below the optimal level, indicating room for enhancement. By reallocating assets, one can achieve a more efficient portfolio with a similar risk level but higher expected returns. Moving towards a riskier portfolio involves increasing exposure to high-growth assets, while a more conservative approach would involve diversifying into lower-risk assets like bonds. It's crucial to align these adjustments with personal risk tolerance and financial objectives to ensure a balanced and effective investment strategy.

Dividends Info

  • Procter & Gamble Company 2.30%
  • Visa Inc. Class A 0.70%
  • Vanguard Information Technology Index Fund ETF Shares 0.60%
  • Vanguard S&P 500 ETF 1.20%
  • Waste Management Inc 1.00%
  • Walmart Inc 0.90%
  • Weighted yield (per year) 0.99%

The portfolio's dividend yield stands at 0.99%, with contributions from various stocks such as Procter & Gamble, Visa, and Walmart. While the yield is modest, it provides a steady income stream, which can be reinvested to enhance long-term returns. Dividends offer a cushion during volatile markets, but the portfolio's focus remains on growth rather than income. Increasing allocations to dividend-paying stocks could enhance yield and provide a more balanced approach. It's essential to weigh the trade-off between growth and income to align with investment objectives, especially if income generation is a priority.

Ongoing product costs Info

  • Grayscale Bitcoin Trust (BTC) 1.50%
  • Vanguard Information Technology Index Fund ETF Shares 0.10%
  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.12%

The portfolio's total expense ratio (TER) is relatively low at 0.12%, with the Vanguard S&P 500 ETF and Vanguard Information Technology Index Fund ETF Shares contributing minimal costs. However, the Grayscale Bitcoin Trust has a higher expense ratio of 1.5%, which could impact overall returns. Keeping costs low is crucial for maximizing net returns over time. Evaluating the cost-effectiveness of each holding and considering lower-cost alternatives could enhance performance. Maintaining a focus on minimizing expenses while achieving desired exposures will help in optimizing the portfolio's efficiency and achieving financial goals.

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