A tech-focused aggressive portfolio with low diversity and high risk but strong growth potential

Report created on Mar 2, 2025

Risk profile

  • Secure
    Speculative

The risk profile, derived from past market volatility, reflects the level of risk the portfolio is exposed to. This assessment helps align your investments with your financial goals and comfort with market fluctuations.

Diversification profile

  • Focused
    Diversified

The diversification assessment evaluates the spread of investments across asset classes, regions, and sectors. This ensures a balanced mix, reducing risk and maximizing returns by not concentrating in any single area.

Positions

The portfolio is heavily weighted towards common stocks, with a few ETFs, and is dominated by technology companies such as Applied Materials, Adobe, and Meta Platforms. The high concentration in individual stocks, especially within the tech sector, indicates an aggressive investment strategy. Compared to a typical diversified benchmark, this portfolio lacks balance, which could expose it to sector-specific risks. To enhance diversification, consider integrating more varied asset classes and sectors. Balancing stock exposure with bonds or other asset types can help mitigate risks associated with market volatility.

Growth Info

Historically, the portfolio has shown impressive growth, with a Compound Annual Growth Rate (CAGR) of 25.42%. This indicates strong potential for wealth accumulation. However, the portfolio also experienced a significant maximum drawdown of -56.65%, reflecting high volatility. The concentration of returns in just 21 days underscores the importance of timing in such a strategy. While past performance is not a guarantee of future results, the portfolio's historical volatility suggests that investors should be prepared for potential fluctuations in value.

Projection Info

Using a Monte Carlo simulation, which models potential future outcomes based on historical data, the portfolio's future performance was analyzed. The simulation reveals a wide range of potential outcomes, with a median expected growth of 603.5% but a 5th percentile loss of -53%. This indicates both high reward potential and significant risk. Investors should be aware that Monte Carlo projections are not predictions but rather probabilistic scenarios. A diversified approach could help reduce the likelihood of adverse outcomes, providing more stability.

Asset classes Info

  • Stocks
    100%

The portfolio is entirely composed of stocks, with no allocation to other asset classes like bonds or commodities. This lack of diversification across asset classes increases risk, as stocks are generally more volatile than bonds. A more balanced portfolio typically includes a mix of asset classes to smooth out returns over time. Integrating bonds or other income-generating assets could provide a buffer during market downturns, offering a more stable return profile while still maintaining growth potential.

Sectors Info

  • Technology
    64%
  • Telecommunications
    11%
  • Industrials
    10%
  • Consumer Discretionary
    7%
  • Financials
    5%
  • Utilities
    1%
  • Health Care
    1%

The portfolio is heavily concentrated in the technology sector, which accounts for 64% of the allocation. This focus can lead to higher volatility, especially during periods of tech sector downturns or regulatory changes. While tech stocks have driven growth in recent years, a more balanced sector allocation could protect against sector-specific risks. Diversifying into sectors like healthcare or consumer staples, which often perform differently from tech, could provide a more resilient portfolio.

Regions Info

  • North America
    99%
  • Asia Developed
    1%

Geographically, the portfolio is overwhelmingly focused on North America, with 99% of assets allocated there. This concentration exposes the portfolio to regional economic and political risks. A more globally diversified portfolio typically includes exposure to other regions, such as Europe or emerging markets, to mitigate these risks. Expanding geographic exposure can help capture growth opportunities in different markets and reduce reliance on the performance of a single region.

Market capitalization Info

  • Large-cap
    55%
  • Mega-cap
    28%
  • Mid-cap
    9%
  • Small-cap
    8%

The portfolio is predominantly invested in large-cap companies, with 55% in big caps and 28% in mega caps. This focus on larger companies offers stability but may limit growth potential compared to smaller, more dynamic firms. Including more mid-cap and small-cap stocks could enhance growth prospects, as these companies often have higher growth rates. Balancing market capitalization exposure can help capture a broader range of market opportunities.

Redundant positions Info

  • Vanguard S&P 500 ETF
    SPDR® Portfolio S&P 500 ETF
    High correlation

The portfolio contains highly correlated assets, particularly the Vanguard and SPDR S&P 500 ETFs. High correlation means these assets tend to move in the same direction, reducing diversification benefits. During market downturns, this can lead to larger losses. Diversifying with assets that have low or negative correlation with each other can improve risk management. Consider replacing or reducing correlated assets to enhance diversification and manage risk more effectively.

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 be optimized for a better risk-return ratio using the Efficient Frontier, which identifies the best possible return for a given level of risk. Currently, the portfolio's expected return is lower than that of an optimized portfolio with the same risk level. By adjusting the asset allocation, particularly reducing highly correlated assets, the portfolio could achieve a more favorable risk-return profile. This optimization focuses on maximizing returns without increasing overall risk.

Dividends Info

  • Applied Materials Inc 0.80%
  • BlackRock Inc 2.10%
  • Meta Platforms Inc. 0.20%
  • Microsoft Corporation 0.60%
  • VanEck Semiconductor ETF 0.50%
  • SPDR® Portfolio S&P 500 ETF 1.30%
  • Vanguard S&P 500 ETF 1.20%
  • SPDR® S&P Aerospace & Defense ETF 0.30%
  • Utilities Select Sector SPDR® Fund 2.80%
  • Weighted yield (per year) 0.40%

The portfolio's dividend yield is relatively low at 0.40%, reflecting its focus on growth-oriented stocks rather than income generation. While dividends can provide a steady income stream and cushion against market volatility, this portfolio prioritizes capital appreciation. Investors seeking income may consider adding higher-yielding assets, such as dividend-focused ETFs or stocks from more stable sectors like utilities. This can provide a balance between growth and income.

Ongoing product costs Info

  • VanEck Semiconductor ETF 0.35%
  • SPDR® Portfolio S&P 500 ETF 0.02%
  • Vanguard S&P 500 ETF 0.03%
  • SPDR® S&P Aerospace & Defense ETF 0.35%
  • Utilities Select Sector SPDR® Fund 0.09%
  • Weighted costs total (per year) 0.03%

The portfolio's overall cost is low, with a Total Expense Ratio (TER) of 0.03%. This is beneficial for long-term returns, as lower costs mean more of the portfolio's gains are retained by the investor. The ETFs within the portfolio have varying expense ratios, with the SPDR and VanEck funds being on the higher end. While costs are low, it's important to ensure that the higher-cost funds provide sufficient value through diversification or unique exposure.

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