Aggressive Portfolio with Low Diversification and High Risk Potential for Growth-Oriented Investors

Report created on Dec 2, 2024

Risk profile Info

6/7
Aggressive
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

The portfolio is composed of a mix of common stocks and ETFs, with a heavy emphasis on individual stocks like Advanced Micro Devices Inc and Walmart Inc, which together make up over half of the portfolio. The inclusion of ETFs like the SPDR® Portfolio S&P 500 ETF and dividend-focused funds adds some diversification, but overall, the portfolio's composition leans heavily towards equities. This setup suggests a focus on growth and capital appreciation, though it lacks diversification across asset classes, which could expose it to higher volatility.

Growth Info

Historically, the portfolio has shown a strong compound annual growth rate (CAGR) of 15.7%, indicating robust performance over time. However, this comes with a significant max drawdown of -48.08%, highlighting the potential for substantial losses during market downturns. Only six days account for 90% of the returns, suggesting high volatility and the importance of timing. This performance pattern is typical for aggressive portfolios, where high returns are often accompanied by high risk. It's crucial to be prepared for fluctuations and to have a long-term investment horizon to weather these ups and downs.

Projection Info

A Monte Carlo simulation, a statistical method used to model the probability of different outcomes, was conducted for forward projection. With 1,000 simulations, the portfolio's potential outcomes vary widely, with a 5th percentile result of -99.41% and a 67th percentile result of -21.76%. Only 293 simulations yielded positive returns, indicating a challenging outlook. The annualized return across all simulations is 14.61%, suggesting potential for growth, albeit with significant risk. This reinforces the need for careful risk management and consideration of diversification to improve future performance probabilities.

Asset classes Info

  • Stocks
    100%

The portfolio is predominantly invested in stocks, accounting for 99.94% of the total allocation, with a negligible cash position. This heavy reliance on equities aligns with an aggressive investment strategy focused on capital growth. However, the lack of diversification across asset classes such as bonds or real estate increases the portfolio's exposure to market volatility. To mitigate this risk, consider introducing other asset classes which can provide a buffer during downturns and contribute to a more balanced risk-return profile.

Sectors Info

  • Technology
    38%
  • Consumer Staples
    27%
  • Health Care
    16%
  • Financials
    6%
  • Consumer Discretionary
    3%
  • Industrials
    3%
  • Energy
    2%
  • Telecommunications
    2%
  • Utilities
    1%
  • Basic Materials
    1%

The sector allocation is heavily skewed towards technology, which comprises 38.11% of the portfolio, followed by consumer defensive and healthcare sectors. While this focus on tech can drive high returns, it also elevates risk due to sector-specific volatility. The portfolio's low exposure to sectors like utilities and real estate might miss out on stability and income opportunities. To achieve a more balanced sector allocation, consider diversifying into underrepresented sectors, thus potentially reducing the portfolio's overall risk and enhancing its resilience against sector-specific downturns.

Regions Info

  • North America
    100%

Geographically, the portfolio is overwhelmingly concentrated in North America, with 99.77% of assets allocated there. This regional focus may limit exposure to growth opportunities in other global markets. While investing in familiar markets can be comforting, it also increases vulnerability to region-specific economic downturns. To enhance diversification and capture potential growth from other regions, consider gradually increasing exposure to international markets. This could provide a hedge against regional risks and tap into the economic potential of emerging and developed markets outside North America.

Redundant positions Info

  • Schwab U.S. Dividend Equity ETF
    iShares Core Dividend Growth ETF
    High correlation

The portfolio contains highly correlated assets, particularly between the Schwab U.S. Dividend Equity ETF and the iShares Core Dividend Growth ETF. High correlation means these assets tend to move in the same direction, which can undermine diversification benefits. Reducing correlation within the portfolio can help spread risk more effectively. Consider replacing one of these ETFs with a less correlated asset or fund to enhance diversification. This can potentially smooth out returns and reduce the impact of market fluctuations on the overall portfolio performance.

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.

Before optimizing the portfolio, it's crucial to address the issue of overlapping assets that provide little diversification benefit. Eliminating these can enhance efficiency without necessarily increasing risk. To achieve a riskier or more conservative portfolio, consider moving along the efficient frontier by adjusting the balance between high-growth and stable assets. A more efficient portfolio at the current risk level could yield a higher expected return of 22.54%. Focus on creating a balanced mix that aligns with your risk tolerance and financial goals to optimize long-term performance.

Dividends Info

  • iShares Core Dividend Growth ETF 2.10%
  • Schwab U.S. Dividend Equity ETF 3.30%
  • SPDR® Portfolio S&P 500 ETF 1.20%
  • Walmart Inc 0.90%
  • Weighted yield (per year) 0.87%

The portfolio's overall dividend yield is relatively low at 0.87%, with ETFs like the Schwab U.S. Dividend Equity ETF offering a higher yield of 3.3%. While dividends can provide a steady income stream and reduce portfolio volatility, the current yield suggests a focus on growth rather than income. For investors seeking more income, consider increasing allocations to higher-yielding assets. Balancing growth and income can offer a more comprehensive investment strategy, providing both capital appreciation and regular income to support financial goals.

Ongoing product costs Info

  • iShares Core Dividend Growth ETF 0.08%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • SPDR® Portfolio S&P 500 ETF 0.02%
  • Weighted costs total (per year) 0.02%

The portfolio's total expense ratio (TER) is quite low at 0.02%, which is beneficial for long-term growth as it minimizes the drag on returns. Low-cost ETFs like the SPDR® Portfolio S&P 500 ETF contribute to this efficiency. Keeping investment costs low is a key component of successful investing, as high fees can erode gains over time. While the current cost structure is favorable, it's important to regularly review and compare fees to ensure continued cost-effectiveness. This can help maximize the portfolio's net returns over the long haul.

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