Highly concentrated growth-focused portfolio with significant tech sector and North America exposure

Report created on Jan 12, 2025

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

1/5
Single-Focused
Less diversification More diversification

Positions

This portfolio is heavily weighted towards technology-focused ETFs, with Invesco NASDAQ 100 ETF and Invesco QQQ Trust making up over 60% of the allocation. The inclusion of iShares® 0-3 Month Treasury Bond ETF adds a conservative element, but the overall composition leans towards growth. This concentration in a few ETFs limits diversification. A common benchmark might include a broader mix of stocks and bonds for balance. Consider diversifying across more asset types to reduce risk and enhance stability.

Growth Info

The portfolio's historical performance shows a robust CAGR of 13.39%, indicating strong growth potential. However, a maximum drawdown of -32.36% suggests high volatility. Compared to benchmarks, this performance is impressive but risky. Past performance can be a guide, yet remember it doesn’t predict future results. To mitigate potential downturns, consider introducing more stable assets to balance the high-risk, high-reward profile.

Projection Info

The Monte Carlo simulation, using historical data, projects a wide range of potential outcomes, with a 5th percentile loss of -68.23% and a 67th percentile gain of 430.33%. This variability underscores the portfolio's risk. While the median simulation suggests positive returns, this approach highlights the uncertainty of future performance. It's essential to be prepared for both positive and negative scenarios, possibly by incorporating assets with more predictable returns.

Asset classes Info

  • Stocks
    77%
  • Cash
    23%

With 76.5% in stocks and 23.5% in cash, the portfolio is heavily skewed towards equities, emphasizing growth over income or stability. This allocation is riskier than a balanced benchmark, which might include more bonds or other fixed-income assets. While stocks offer higher growth potential, consider diversifying into other asset classes to reduce volatility and provide a cushion during market downturns.

Sectors Info

  • Technology
    36%
  • Telecommunications
    18%
  • Consumer Discretionary
    11%
  • Consumer Staples
    4%
  • Health Care
    4%
  • Industrials
    2%
  • Basic Materials
    1%
  • Utilities
    1%

The portfolio is tech-heavy, with over 36% in technology, followed by communication services and consumer cyclicals. This sector concentration can lead to higher volatility, especially during tech market fluctuations. A more balanced sector allocation could mitigate risks associated with sector-specific downturns. Diversifying into sectors like healthcare or financial services might provide stability and align closer to broader market indices.

Regions Info

  • North America
    76%
  • Europe Developed
    1%

With 75.8% exposure to North America, the portfolio is geographically concentrated, limiting international diversification. This focus on a single region exposes the portfolio to regional economic risks. A more globally diversified portfolio might include higher allocations to Europe, Asia, or emerging markets. This could reduce risk and tap into growth opportunities worldwide, aligning with global benchmarks.

Redundant positions Info

  • Invesco NASDAQ 100 ETF
    Invesco QQQ Trust
    ProShares Ultra QQQ
    High correlation

The portfolio contains highly correlated assets, particularly among the Invesco ETFs and ProShares Ultra QQQ. This correlation limits diversification benefits, as these assets tend to move in tandem. In downturns, such correlation can amplify losses. To enhance diversification, consider replacing some overlapping assets with those that have historically lower correlations to the existing holdings.

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's current state could benefit from Efficient Frontier optimization. By reallocating assets to achieve the best possible risk-return ratio, the portfolio can be more efficient. However, this requires addressing the high correlation among current holdings. Optimizing involves not just reallocating but also potentially adding new, less correlated assets to achieve true diversification and improved efficiency.

Dividends Info

  • ProShares Ultra QQQ 0.20%
  • Invesco QQQ Trust 0.60%
  • Invesco NASDAQ 100 ETF 0.60%
  • iShares® 0-3 Month Treasury Bond ETF 5.10%
  • Weighted yield (per year) 1.55%

The portfolio's dividend yield is modest at 1.55%, primarily driven by the iShares® 0-3 Month Treasury Bond ETF. While dividends can provide a steady income stream, this portfolio prioritizes growth over income. If income is a goal, consider increasing exposure to dividend-paying stocks or ETFs. This could provide a buffer during volatile market periods, adding stability to returns.

Ongoing product costs Info

  • ProShares Ultra QQQ 0.95%
  • Invesco QQQ Trust 0.20%
  • Invesco NASDAQ 100 ETF 0.15%
  • iShares® 0-3 Month Treasury Bond ETF 0.07%
  • Weighted costs total (per year) 0.19%

The total expense ratio (TER) of 0.19% is relatively low, supporting better long-term performance by minimizing costs. The ProShares Ultra QQQ has the highest fee at 0.95%, which could be optimized. Consider evaluating whether lower-cost alternatives could replace high-fee assets without sacrificing performance. Keeping costs low is crucial for maximizing net returns over time.

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