Highly Aggressive Portfolio with High Risk and Low Diversification Focused on Leveraged ETFs

Report created on Nov 29, 2024

Risk profile Info

6/7
Aggressive
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Diversification profile Info

1/5
Single-Focused
← Less diversification More diversification →

Positions

The portfolio consists of two leveraged ETFs: ProShares UltraPro S&P500 at 55% and Direxion Daily 20+ Year Treasury Bull 3X Shares at 45%. This composition is highly aggressive, emphasizing leveraged exposure to both equities and long-term treasuries. Such a concentrated focus on leveraged ETFs can lead to significant volatility. Leveraged ETFs aim to amplify daily returns, which can be both beneficial and detrimental depending on market conditions. To improve the portfolio's stability, consider incorporating non-leveraged investments to balance the risk and provide more consistent long-term growth.

Growth Info

Historically, the portfolio has shown a compound annual growth rate (CAGR) of 18.91%, which is impressive. However, it comes with a max drawdown of -65.15%, indicating substantial risk during downturns. The concentrated nature of leveraged ETFs contributes to these extreme fluctuations. While the high CAGR is attractive, the potential for significant losses requires careful consideration. To potentially mitigate drawdowns, diversifying into less volatile asset classes might help in achieving more stable returns without sacrificing too much growth potential.

Projection Info

Using a Monte Carlo simulation with 1,000 iterations, the portfolio's projected outcomes vary widely. The 5th percentile suggests a potential loss of -89.79%, while the 50th percentile indicates a gain of 126.16%. The median annualized return is 17.78%, with 664 simulations showing positive returns. Monte Carlo simulations provide insights into the range of possible outcomes by modeling random scenarios. To enhance future performance, consider adjusting the portfolio to reduce downside risk while maintaining growth potential, possibly by integrating more conservative assets.

Asset classes Info

  • Stocks
    40%
  • Bonds
    32%
  • Cash
    28%

The portfolio is heavily weighted towards stocks at 40.21%, bonds at 31.63%, and cash at 28.15%. This allocation reflects an aggressive stance, with a significant portion in equities and leveraged long-term treasuries. The cash component, while substantial, may not provide enough stability given the leveraged nature of the other assets. To potentially improve risk-adjusted returns, a more balanced distribution across asset classes could be considered, incorporating traditional bonds and equities to provide a buffer against market volatility.

Sectors Info

  • Technology
    18%
  • Financials
    7%
  • Consumer Discretionary
    6%
  • Health Care
    6%
  • Telecommunications
    5%
  • Industrials
    4%
  • Consumer Staples
    3%
  • Energy
    2%
  • Utilities
    1%
  • Real Estate
    1%
  • Basic Materials
    1%

Sector allocation is concentrated, with technology at 18.02%, followed by financial services and consumer cyclicals. The portfolio lacks diversification across sectors, increasing vulnerability to sector-specific downturns. Leveraged ETFs often have concentrated sector exposure, which can lead to amplified sector risks. To mitigate these risks, consider diversifying into a broader range of sectors, which could provide a more balanced exposure and reduce the impact of adverse movements in any single sector.

Regions Info

  • North America
    55%

Geographically, the portfolio is heavily focused on North America at 54.68%, with minimal exposure to Europe and Asia. This concentration exposes the portfolio to regional risks, such as economic or political instability in North America. Geographic diversification can help spread risk and capture opportunities in different markets. To potentially enhance the portfolio's resilience, consider incorporating investments with broader geographic exposure, which may help balance regional risks and take advantage of global growth opportunities.

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 optimization potential is limited by its high-risk, single-focused nature. To move towards a more conservative portfolio, consider adding non-leveraged assets and diversifying across sectors and geographies. This can reduce volatility and improve risk-adjusted returns. Conversely, to pursue even higher risk, increasing leverage or concentration may be considered, though this is not advisable without careful consideration. Focus on building a diversified portfolio that aligns with your risk tolerance and financial goals for long-term success.

Dividends Info

  • Direxion Daily 20+ Year Treasury Bull 3X Shares 3.50%
  • ProShares UltraPro S&P500 0.70%
  • Weighted yield (per year) 1.96%

The portfolio's dividend yield stands at 1.96%, with Direxion Daily 20+ Year Treasury Bull 3X Shares contributing 3.5% and ProShares UltraPro S&P500 at 0.7%. While dividends provide a steady income stream, the overall yield is modest due to the leveraged nature of the ETFs. Leveraged ETFs typically prioritize capital gains over dividends. To enhance income generation, consider incorporating dividend-focused investments, which can provide a more consistent cash flow and potentially improve total returns.

Ongoing product costs Info

  • Direxion Daily 20+ Year Treasury Bull 3X Shares 1.04%
  • ProShares UltraPro S&P500 0.92%
  • Weighted costs total (per year) 0.97%

The portfolio's total expense ratio is 0.97%, with Direxion Daily 20+ Year Treasury Bull 3X Shares at 1.04% and ProShares UltraPro S&P500 at 0.92%. These costs are relatively high, reflecting the leveraged nature of the ETFs. High expense ratios can erode returns over time, especially in volatile markets. To potentially reduce costs, consider exploring lower-cost investment options that align with the portfolio's risk profile, which can help improve net returns without sacrificing strategy.

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