Portfolio with Moderate Risk and Limited Diversification Needs Optimization for Better Performance

Report created on Dec 3, 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 allocation to ProShares UltraPro S&P500 at 30% and iShares 25+ Year Treasury STRIPS Bond ETF at 25%. This composition indicates a focus on major indices and long-term bonds, providing a blend of equity and fixed-income exposure. While ETFs offer diversification within themselves, the overall portfolio lacks a broad range of asset classes. This composition suits an investor looking for simplicity and ease of management. To enhance diversification, consider adding more varied asset classes to balance risk and return.

Growth Info

Historically, the portfolio has delivered a CAGR of 11.25%, which is quite impressive. However, it experienced a maximum drawdown of -26.78%, highlighting its vulnerability during market downturns. The fact that 90% of returns came from just 10 days suggests that the portfolio's performance is heavily reliant on specific market movements. This volatility might be concerning for risk-averse investors. To mitigate such risks, incorporating more stable investments could help smooth out returns over time, reducing the impact of market fluctuations.

Projection Info

Using a Monte Carlo simulation, which models potential future performance based on historical data, the portfolio shows varied outcomes. With a hypothetical initial investment, there's a wide range of potential returns, from a 5th percentile loss of -50.96% to a 67th percentile gain of 246.48%. The median outcome suggests a return of 134.13%. This indicates potential for substantial growth, but also significant risk. To improve future performance, consider adjusting the portfolio to better align with your risk tolerance, potentially by diversifying into more stable asset classes.

Asset classes Info

  • Cash
    62%
  • Stocks
    40%
  • Other
    13%

The portfolio is heavily weighted towards cash at 62.39%, with stocks making up 39.51% and other assets at 12.56%. This allocation suggests a conservative approach, prioritizing liquidity and stability over aggressive growth. However, the high cash allocation may limit potential returns over time. To optimize the portfolio, consider reducing cash holdings in favor of more growth-oriented investments, such as equities or alternative assets, which could enhance long-term returns while maintaining a balanced risk profile.

Sectors Info

  • Technology
    11%
  • Financials
    7%
  • Consumer Discretionary
    5%
  • Industrials
    4%
  • Health Care
    4%
  • Telecommunications
    3%
  • Consumer Staples
    2%
  • Energy
    2%
  • Basic Materials
    1%
  • Utilities
    1%
  • Real Estate
    1%

Sector allocation shows a concentration in Technology at 10.56%, followed by Financial Services and Consumer Cyclicals. This indicates a tilt towards sectors with growth potential, but also higher volatility. The lack of exposure to sectors like Utilities and Real Estate, which typically offer stability and dividends, could increase risk during market downturns. To improve sector diversification, consider reallocating some investments into defensive sectors, which could provide more consistent returns and reduce overall portfolio volatility.

Regions Info

  • North America
    36%
  • Europe Developed
    2%
  • Japan
    1%

Geographically, the portfolio is heavily focused on North America, with 36.08% allocation, and minimal exposure to other regions. This concentration poses a risk if the North American markets underperform. Diversifying geographically can help mitigate regional risks and tap into growth opportunities in emerging and developed markets worldwide. Consider increasing exposure to international equities, which could provide a hedge against domestic market volatility and enhance potential returns through global diversification.

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, as a more efficient portfolio is possible with the same risk level but higher expected returns. By moving along the efficient frontier, investors can achieve a better risk-return trade-off. To make the portfolio riskier, consider increasing exposure to equities or growth sectors. For a more conservative approach, allocate more to bonds or defensive sectors. This adjustment can help align the portfolio with personal risk tolerances and financial goals, improving overall performance.

Dividends Info

  • Avantis® International Equity ETF 3.00%
  • Avantis® U.S. Small Cap Value ETF 1.50%
  • Simplify Exchange Traded Funds 8.20%
  • iMGP DBi Managed Futures Strategy ETF 5.20%
  • WisdomTree Emerging Markets SmallCap Dividend Fund 3.50%
  • iShares 25+ Year Treasury STRIPS Bond ETF 4.20%
  • ProShares UltraPro S&P500 0.70%
  • Weighted yield (per year) 2.64%

The portfolio's total dividend yield is 2.64%, with some ETFs like the Simplify Exchange Traded Funds offering a high yield of 8.2%. While dividends provide a steady income stream, the overall yield is relatively modest. To enhance income generation, consider increasing exposure to high-dividend-paying assets, such as dividend-focused ETFs or REITs. This strategy could boost the portfolio's cash flow, providing more stability and cushioning against market volatility, while still allowing for growth potential.

Ongoing product costs Info

  • Avantis® International Equity ETF 0.23%
  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Simplify Exchange Traded Funds 0.78%
  • iMGP DBi Managed Futures Strategy ETF 0.85%
  • WisdomTree Emerging Markets SmallCap Dividend Fund 0.58%
  • SPDR Gold MiniShares 0.10%
  • iShares 25+ Year Treasury STRIPS Bond ETF 0.10%
  • KFA Mount Lucas Index Strategy ETF 0.90%
  • ProShares UltraPro S&P500 0.92%
  • Weighted costs total (per year) 0.55%

The portfolio's total expense ratio (TER) is 0.55%, with individual ETF costs ranging from 0.1% to 0.92%. While these costs are reasonable for an ETF-based portfolio, they can still impact long-term returns. Lowering investment costs is crucial for maximizing returns. Consider reviewing and potentially replacing higher-cost ETFs with more cost-effective alternatives, without compromising on diversification or performance. Keeping costs low ensures more of your investment returns are retained, contributing to better overall portfolio performance.

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