High Risk Low Diversity Portfolio with Tech-Heavy Allocation and Impressive Historical Growth Yet Limited Geographic Spread

Report created on Jul 10, 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

The portfolio is heavily concentrated in tech stocks, with Amazon, NVIDIA, and AMD making up a significant portion. This concentration implies a strong belief in the tech sector's growth potential but also exposes the portfolio to sector-specific risks. With only a few companies dominating the portfolio, it lacks diversification, which can be risky if any of these companies underperform. To balance out, consider diversifying into other sectors or asset classes. This could help mitigate risks and improve the portfolio's resilience against market volatility.

Growth Info

Historically, the portfolio has shown impressive growth, with a compound annual growth rate (CAGR) of 33.3%. However, the maximum drawdown of -57.82% indicates significant volatility. This suggests that while the portfolio has the potential for high returns, it can also experience large fluctuations. Such volatility may not be suitable for investors with a low-risk tolerance. To protect against potential downturns, consider rebalancing the portfolio towards a more diversified asset allocation.

Projection Info

Using a Monte-Carlo simulation, which models potential future returns based on historical data, the portfolio shows a wide range of outcomes. With a hypothetical initial investment, the 50th percentile projects a 4,799.09% return, indicating strong potential growth. However, the 5th percentile shows a much lower return, emphasizing the portfolio's risk. This simulation highlights the importance of understanding the potential variability in returns and ensuring the portfolio aligns with the investor's risk tolerance and long-term goals.

Asset classes Info

  • Stocks
    100%

The portfolio is almost entirely composed of stocks, with a negligible cash position. This heavy stock allocation suggests a high-risk, high-reward strategy, typical for growth-focused investors. While stocks can provide substantial returns, they also come with increased volatility. To reduce risk, consider incorporating other asset classes like bonds, which can provide stability and income. A more balanced approach could help cushion the portfolio during market downturns while still allowing for growth.

Sectors Info

  • Consumer Discretionary
    46%
  • Technology
    35%
  • Telecommunications
    7%
  • Financials
    3%
  • Health Care
    3%
  • Industrials
    2%
  • Consumer Staples
    1%
  • Energy
    1%
  • Utilities
    1%
  • Real Estate
    1%

The portfolio's sector allocation is heavily skewed towards consumer cyclicals and technology, making up over 80% of the portfolio. This concentration exposes the portfolio to sector-specific risks, such as regulatory changes or technological disruptions. Diversifying into other sectors like healthcare or utilities could provide more stability and reduce the impact of sector-specific downturns. A well-diversified sector allocation can help mitigate risks and improve the portfolio's overall resilience.

Regions Info

  • North America
    100%

Geographically, the portfolio is overwhelmingly focused on North America, with minimal exposure to other regions. This lack of geographic diversification could be a concern if the North American markets face downturns. Expanding into international markets could provide growth opportunities and reduce regional risks. Consider diversifying into developed and emerging markets, which can offer different growth dynamics and help balance the portfolio's geographic exposure.

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 efficient in terms of risk-return balance. However, it's not the optimal portfolio, which has a higher expected return and risk level. The efficient frontier represents the set of portfolios offering the maximum expected return for a given level of risk. To optimize, consider adjusting the risk level according to personal preferences, potentially incorporating more diverse assets to enhance returns while managing risk effectively.

Dividends Info

  • Alphabet Inc Class A 0.20%
  • Meta Platforms Inc. 0.30%
  • Microsoft Corporation 0.50%
  • Vanguard S&P 500 ETF 1.20%
  • Weighted yield (per year) 0.32%

The portfolio's dividend yield is relatively low at 0.32%, indicating a focus on growth rather than income. This is typical for a growth-oriented portfolio, where the emphasis is on capital appreciation rather than dividend income. For investors seeking steady income, consider increasing exposure to dividend-paying stocks or funds. This could provide a more balanced approach, offering both growth potential and income, which might be beneficial in times of market volatility.

Ongoing product costs Info

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

The portfolio's costs are low, with the Vanguard S&P 500 ETF having a Total Expense Ratio (TER) of 0.03%. Low costs are beneficial as they can significantly impact net returns over time. Keeping investment costs low is crucial for maximizing returns, especially in a growth-focused portfolio. It's essential to regularly review and compare fees across investments to ensure they remain competitive. This cost-effective approach aligns well with long-term investment strategies, helping to enhance overall returns.

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