High-Risk Low Diversification Portfolio with Significant Technology Exposure and Impressive Historical Performance

Report created on Dec 2, 2024

Risk profile Info

6/7
Aggressive
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

The portfolio is heavily concentrated in technology stocks, with Advanced Micro Devices Inc and Enphase Energy Inc making up nearly half of the total allocation. Additionally, the iShares Core S&P 500 ETF provides some diversification, but overall, the portfolio lacks diversity across different asset classes. The risk classification is aggressive, which suggests a high tolerance for volatility. This composition indicates a strong focus on growth, but also exposes the portfolio to significant sector-specific risks. To mitigate these risks, consider diversifying into other sectors and asset classes to balance potential downturns in the technology sector.

Growth Info

Historically, the portfolio has shown remarkable performance with a CAGR of 39.36%, indicating strong growth potential. However, this comes with a high max drawdown of -61.83%, reflecting significant volatility and potential for substantial losses during market downturns. The concentrated nature of the portfolio means that a small number of days contribute to the majority of returns, which could be risky if those days do not materialize in the future. To protect against this, consider strategies that reduce volatility and smooth out returns over time.

Projection Info

Using a Monte Carlo simulation with 1,000 iterations, the portfolio's future performance was projected. The simulation suggests a wide range of possible outcomes, with a 5th percentile return of -67.98% and a 67th percentile return of 3,139.78%. While the median return is promising, the potential for significant losses is evident. Monte Carlo simulations provide a statistical approach to understanding possible future performance, emphasizing the need for diversification to reduce risk. Consider rebalancing the portfolio to manage these potential outcomes better and align with long-term financial goals.

Asset classes Info

  • Stocks
    100%

The portfolio is overwhelmingly invested in stocks, with a minuscule allocation in cash. This lack of diversification across asset classes increases risk, particularly in volatile markets. While stocks offer higher growth potential, they also come with greater risk. To create a more balanced portfolio, consider incorporating other asset classes like bonds, which can provide stability and reduce overall portfolio risk. A more diversified asset allocation can help achieve a better risk-return balance, especially during market downturns.

Sectors Info

  • Technology
    56%
  • Industrials
    15%
  • Consumer Staples
    10%
  • Real Estate
    5%
  • Financials
    3%
  • Consumer Discretionary
    3%
  • Health Care
    3%
  • Telecommunications
    2%
  • Energy
    1%
  • Utilities
    1%

With 55.70% of the portfolio allocated to the technology sector, there is a significant concentration risk. While technology has been a strong performer, it is also subject to rapid changes and volatility. The remaining sectors have much smaller allocations, which does not adequately diversify the portfolio. To mitigate sector-specific risks, consider increasing exposure to sectors that have historically shown resilience during market fluctuations. A more balanced sector allocation can help stabilize returns and reduce potential losses from sector-specific downturns.

Regions Info

  • North America
    100%

The portfolio is almost entirely concentrated in North America, with negligible exposure to other regions. This geographic concentration increases vulnerability to region-specific economic and political risks. While North American markets have performed well, diversification into other global markets can provide additional growth opportunities and reduce risk. Consider exploring investments in other developed and emerging markets to achieve a more geographically balanced portfolio. This can help protect against downturns in any single region and capitalize on global economic growth.

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 indicates that there is room for improvement in terms of diversification and risk management. By moving along the efficient frontier, the portfolio can be adjusted to either increase returns for the same level of risk or reduce risk while maintaining expected returns. For those seeking a riskier portfolio, consider increasing exposure to high-growth sectors or assets. Conversely, for a more conservative approach, allocate more to stable, income-generating assets. Focus on achieving a balanced risk-return profile that aligns with long-term goals.

Dividends Info

  • Costco Wholesale Corp 2.00%
  • iShares Core S&P 500 ETF 1.20%
  • Prologis Inc 3.20%
  • Weighted yield (per year) 0.65%

The portfolio's dividend yield is relatively low at 0.65%, with Prologis Inc offering the highest yield at 3.2%. This suggests a focus on growth rather than income generation. While growth stocks can provide substantial capital appreciation, a balanced portfolio should also consider dividend-paying stocks for steady income. Including higher dividend-yielding stocks can enhance cash flow, especially during periods of market volatility, and offer a measure of stability. Consider integrating more income-generating assets to complement the growth focus.

Ongoing product costs Info

  • iShares Core S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.01%

The cost structure of the portfolio is efficient, with the iShares Core S&P 500 ETF having a low expense ratio of 0.03% and a total TER of 0.01%. Low costs are beneficial as they enhance net returns over time. However, it is essential to regularly review and manage costs to ensure they remain competitive. While the current cost structure is favorable, always be on the lookout for opportunities to further reduce investment costs, as this can significantly impact long-term performance.

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