Growth-Oriented Portfolio with High Risk and Moderate Diversification Focused on Technology and North America

Report created on Jul 11, 2024

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

This portfolio is heavily weighted towards equities, with a significant portion allocated to the Vanguard Total Stock Market Index Fund ETF and individual stocks like Micron Technology and Tesla. The presence of ETFs provides some diversification, but the focus is predominantly on US equities. With a total of five positions, there's a moderate level of diversification, but the concentration in a few stocks increases the portfolio's risk. This composition suggests a growth-oriented strategy, aiming for capital appreciation rather than income generation. Balancing this with more diversified assets could help in reducing risk.

Growth Info

Historically, the portfolio has shown impressive returns with a compound annual growth rate (CAGR) of 21.98%. However, this performance comes with a significant risk, evidenced by a maximum drawdown of -45.9%. The high returns are driven by a concentrated exposure to high-growth stocks, which also adds volatility. This type of performance is typical for portfolios with a heavy emphasis on technology and growth stocks. While the returns are attractive, it's crucial to consider whether this level of risk aligns with your long-term financial goals and risk tolerance.

Projection Info

Using a Monte Carlo simulation with 1,000 scenarios, the portfolio shows a wide range of potential outcomes. This method provides a probabilistic forecast, considering various market conditions. The median outcome suggests a 56.97% return, but there's a risk of substantial losses, with a 5th percentile outcome of -90.24%. On the upside, there's a 67th percentile outcome of 233.75%. The annualized return across simulations is 13.43%. While this indicates potential for high returns, it also underscores the importance of being prepared for volatility and potential downturns.

Asset classes Info

  • Stocks
    97%
  • Cash
    4%

The portfolio is predominantly invested in stocks, accounting for over 96% of the allocation. This high equity exposure indicates a focus on growth, but it also increases the portfolio's sensitivity to market fluctuations. The minimal cash position provides limited liquidity, which could be a concern during market downturns. Diversifying into other asset classes like bonds could help mitigate risk and provide more stability. Balancing the high-growth potential of equities with more conservative investments may lead to a more resilient portfolio.

Sectors Info

  • Technology
    45%
  • Consumer Discretionary
    24%
  • Financials
    7%
  • Health Care
    5%
  • Industrials
    4%
  • Telecommunications
    4%
  • Consumer Staples
    3%
  • Energy
    2%
  • Real Estate
    1%
  • Basic Materials
    1%
  • Utilities
    1%

Technology dominates the sector allocation, making up 45.46% of the portfolio. This heavy concentration in one sector can lead to increased volatility and risk, particularly if the tech industry faces downturns. Other sectors like Consumer Cyclicals and Financial Services provide some diversification, but the overall allocation is skewed. A more balanced sector allocation could help reduce risk and enhance stability. Diversifying into sectors with different economic cycles can provide a buffer against sector-specific downturns, leading to a more robust portfolio.

Regions Info

  • North America
    91%
  • Europe Developed
    2%
  • Asia Emerging
    1%
  • Japan
    1%
  • Asia Developed
    1%

Geographically, the portfolio is heavily concentrated in North America, with over 91% of assets allocated there. This focus on the US market exposes the portfolio to regional risks and limits diversification benefits from global markets. Expanding the geographic allocation to include more exposure to emerging markets and developed regions outside North America could enhance diversification and potentially improve risk-adjusted returns. A more global approach can help mitigate regional economic risks and capture growth opportunities in different markets.

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 is close to the efficient frontier, indicating it's relatively well-optimized for its risk level. However, there's room for improvement. To achieve a more optimal portfolio, consider adjusting the risk level according to personal preferences. Moving along the efficient frontier can help balance risk and return. For a riskier portfolio, increasing equity exposure might be an option, while a more conservative approach could involve adding bonds or other low-risk assets. Optimization can enhance returns without significantly increasing risk.

Dividends Info

  • Micron Technology Inc 0.40%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Vanguard Total International Stock Index Fund ETF Shares 3.00%
  • Weighted yield (per year) 0.83%

The portfolio's dividend yield stands at 0.83%, with contributions from holdings like the Vanguard Total Stock Market Index Fund ETF and Micron Technology. This yield is relatively low, reflecting the growth-oriented nature of the portfolio. While dividends provide a steady income stream, the focus here is on capital appreciation. Investors seeking regular income may need to adjust the portfolio to include higher-yielding assets. Balancing growth with income-generating investments can provide a more stable cash flow while still capturing growth opportunities.

Ongoing product costs Info

  • AdvisorShares Pure US Cannabis ETF 0.83%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.04%

The portfolio's total expense ratio is 0.04%, which is quite low, thanks to the inclusion of cost-effective ETFs like Vanguard funds. However, the AdvisorShares Pure US Cannabis ETF has a higher expense ratio of 0.83%, which could impact overall returns. Keeping investment costs low is crucial for maximizing net returns. Monitoring and managing expense ratios can help enhance portfolio performance. Regularly reviewing the cost structure and considering low-cost alternatives can lead to more efficient investment outcomes.

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