High Risk High Reward Portfolio with Strong Technology Focus and Limited Geographic Diversification

Report created on Dec 5, 2024

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

The portfolio is heavily weighted towards two major ETFs, the SPDR S&P 500 ETF Trust and the Fidelity® MSCI Information Technology Index ETF, making up 90% of the portfolio. The remaining 10% is invested in individual stocks, Palantir Technologies Inc and Tesla Inc. This composition indicates a significant reliance on the performance of the US stock market, particularly the technology sector. While this can lead to substantial gains, it also exposes the portfolio to higher volatility and risk. To enhance stability, consider diversifying into different asset classes or sectors.

Growth Info

Historically, the portfolio has performed impressively with a compound annual growth rate (CAGR) of 22.65%. However, this comes with a maximum drawdown of -32.87%, highlighting the portfolio's vulnerability to market downturns. The concentrated nature of the investments means that a small number of days account for the majority of returns, which can be risky. To maintain strong performance while reducing risk, explore strategies to smooth out returns across more trading days by diversifying holdings.

Projection Info

Using a Monte Carlo simulation with 1,000 scenarios, the portfolio shows a wide range of potential outcomes. The median projection suggests a significant increase, with a 50th percentile result of 4,215.72% growth. However, there remains a 5th percentile chance of only 50.23% growth, reflecting the inherent risks. This simulation underscores the importance of diversification to mitigate downside risk while capturing upside potential. Consider rebalancing the portfolio to manage risk and improve the likelihood of achieving desired financial goals.

Asset classes Info

  • Stocks
    100%

The portfolio is almost entirely composed of stocks, with a negligible cash position. This heavy stock allocation aligns with a growth-oriented strategy but also increases exposure to market fluctuations. While stocks can offer higher returns over the long term, they can also be more volatile. Investors seeking a more balanced risk profile might consider incorporating bonds or other fixed-income assets to reduce volatility and provide a buffer during market downturns.

Sectors Info

  • Technology
    61%
  • Consumer Discretionary
    10%
  • Financials
    7%
  • Health Care
    5%
  • Telecommunications
    5%
  • Industrials
    4%
  • Consumer Staples
    3%
  • Energy
    2%
  • Utilities
    1%
  • Real Estate
    1%
  • Basic Materials
    1%

With 61.34% of the portfolio in the technology sector, the portfolio is highly concentrated. This sector has been a strong performer, but such concentration increases vulnerability to sector-specific risks. Other sectors, like consumer cyclicals and financial services, have minimal representation. To reduce sector-specific risk and achieve a more balanced portfolio, consider increasing exposure to underrepresented sectors. This can help cushion the portfolio against potential downturns in the technology sector.

Regions Info

  • North America
    99%

The portfolio's geographic allocation is overwhelmingly focused on North America, with 99.37% of assets invested there. This limited geographic diversification exposes the portfolio to regional economic and political risks. While the US market has been strong, incorporating international exposure can provide growth opportunities and risk diversification. By expanding into other regions, the portfolio can potentially benefit from different economic cycles and reduce dependency on the North American market.

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.

Portfolio optimization suggests that while the current setup is aligned with a growth strategy, there's room for improvement in risk management. Moving along the efficient frontier can help achieve a more balanced risk-return profile. For those seeking a riskier portfolio, increasing exposure to high-growth stocks is an option. Conversely, for a more conservative approach, consider incorporating fixed-income securities or diversifying into less volatile sectors. Focus on achieving a balance that aligns with personal risk tolerance and financial goals.

Dividends Info

  • Fidelity® MSCI Information Technology Index ETF 0.60%
  • SPDR S&P 500 ETF Trust 1.20%
  • Weighted yield (per year) 0.84%

The portfolio's dividend yield is relatively low at 0.84%, reflecting its growth-oriented strategy. The focus on technology stocks, which typically reinvest earnings for growth rather than paying dividends, contributes to this lower yield. While this approach aligns with capital appreciation goals, those seeking income might consider adding higher-yielding investments. Balancing growth with income-generating assets can provide a more stable cash flow, especially during periods of market volatility.

Ongoing product costs Info

  • Fidelity® MSCI Information Technology Index ETF 0.08%
  • SPDR S&P 500 ETF Trust 0.10%
  • Weighted costs total (per year) 0.08%

The portfolio's costs are fairly low, with a total expense ratio (TER) of 0.08%. This is advantageous for long-term growth as lower costs can significantly enhance net returns over time. The two main ETFs in the portfolio have competitive expense ratios, contributing to the overall cost efficiency. Keeping costs low is a smart strategy, but it's also important to ensure that low-cost investments align with overall investment objectives. Regularly review cost structures to maintain efficiency.

What next?

Ready to invest in this portfolio?

Select a broker that fits your needs and watch for low fees to maximize your returns.

Select broker

Create your own report?

Analyze your portfolio

Join our community!

Join Discord

The information provided on this platform is for informational purposes only and should not be considered as financial or investment advice. Insightfolio does not provide investment advice, personalized recommendations, or guidance regarding the purchase, holding, or sale of financial assets. The tools and content are intended for educational purposes only and are not tailored to individual circumstances, financial needs, or objectives.

Insightfolio assumes no liability for the accuracy, completeness, or reliability of the information presented. Users are solely responsible for verifying the information and making independent decisions based on their own research and careful consideration. Use of the platform should not replace consultation with qualified financial professionals.

Investments involve risks. Users should be aware that the value of investments may fluctuate and that past performance is not an indicator of future results. Investment decisions should be based on personal financial goals, risk tolerance, and independent evaluation of relevant information.

Insightfolio does not endorse or guarantee the suitability of any particular financial product, security, or strategy. Any projections, forecasts, or hypothetical scenarios presented on the platform are for illustrative purposes only and are not guarantees of future outcomes.

By accessing the services, information, or content offered by Insightfolio, users acknowledge and agree to these terms of the disclaimer. If you do not agree to these terms, please do not use our platform.

Instrument logos provided by Elbstream.

Help us improve Insightfolio

Your feedback makes a difference! Share your thoughts in our quick survey. Take the survey