Aggressive Portfolio with High Tech Focus and Single-Focused Diversification Needs Optimization for Better Performance

Report created on Dec 3, 2024

Risk profile Info

6/7
Aggressive
Less risk More risk

Diversification profile Info

1/5
Single-Focused
Less diversification More diversification

Positions

The portfolio is heavily weighted towards technology, with significant investments in both individual stocks and ETFs. The largest positions are in Vanguard S&P 500 ETF and Microsoft Corporation, making up nearly half of the portfolio. This indicates a strong preference for large-cap stocks and growth-oriented investments. While this composition can offer substantial returns, it also increases exposure to market volatility. A more balanced approach could help mitigate risks. Consider diversifying into different asset classes and sectors to reduce reliance on tech stocks and improve overall stability.

Growth Info

Historically, the portfolio has performed impressively with a CAGR of 29.87%. However, it also experienced a significant max drawdown of -49.24%, indicating high volatility. This suggests that while the portfolio can generate strong returns, it is also susceptible to substantial losses during market downturns. Understanding this volatility is crucial for managing expectations and aligning with personal risk tolerance. To improve resilience, consider incorporating assets that provide stability and reduce the impact of market fluctuations, such as bonds or more defensive stocks.

Projection Info

Using a Monte-Carlo simulation, which models potential future performance based on historical data, the portfolio shows a wide range of outcomes. With a hypothetical initial investment, the median outcome suggests a potential return of over 700%. However, the worst-case scenario indicates a loss of nearly 77%. This highlights the portfolio's aggressive nature and potential for both high reward and high risk. To better manage this uncertainty, consider strategies that can help smooth out returns, such as diversifying into less correlated assets or rebalancing periodically.

Asset classes Info

  • Stocks
    92%
  • Cash
    7%
  • Bonds
    1%

The portfolio is dominated by stocks, accounting for over 91% of the total allocation, with minimal exposure to cash, bonds, and other assets. This heavy stock allocation aligns with an aggressive investment strategy but may lack the diversification needed to cushion against market volatility. By including more bonds or other asset classes, the portfolio can achieve a more balanced risk-return profile. This can help protect against downturns while still capturing growth opportunities, making it more suitable for long-term investment goals.

Sectors Info

  • Technology
    65%
  • Consumer Discretionary
    8%
  • Telecommunications
    7%
  • Health Care
    5%
  • Financials
    4%
  • Energy
    3%
  • Consumer Staples
    3%
  • Industrials
    3%
  • Utilities
    1%
  • Basic Materials
    1%
  • Real Estate
    1%

Technology is the dominant sector in this portfolio, comprising nearly 65% of the total allocation. This concentration exposes the portfolio to sector-specific risks, such as regulatory changes or technological disruptions. While tech stocks can offer high growth potential, over-reliance on a single sector can lead to increased volatility. To mitigate this risk, consider diversifying into other sectors like healthcare or consumer staples, which can provide stability and reduce the impact of sector-specific downturns.

Regions Info

  • North America
    99%
  • Asia Emerging
    1%
  • Europe Developed
    1%

The portfolio is heavily concentrated in North America, with over 98% of assets allocated to this region. This lack of geographic diversification can expose the portfolio to regional economic risks, such as changes in fiscal policy or currency fluctuations. Expanding exposure to international markets could help balance these risks and capture growth opportunities in emerging and developed regions. Consider exploring investments in diverse geographic areas to enhance the portfolio's resilience against regional economic shocks and improve long-term growth prospects.

Redundant positions Info

  • Invesco QQQ Trust
    ProShares UltraPro QQQ
    Vanguard Growth Index Fund ETF Shares
    High correlation

The portfolio contains several highly correlated assets, particularly within the technology sector, such as Invesco QQQ Trust and ProShares UltraPro QQQ. This high correlation means that these assets tend to move in the same direction, reducing the diversification benefits. As a result, the portfolio may be more vulnerable to market swings. To improve diversification, consider reducing exposure to overlapping assets and incorporating investments with lower correlations. This can help create a more balanced portfolio with a smoother return profile.

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, focus on reducing highly correlated assets that don't offer diversification benefits. This can enhance the portfolio's efficiency. To achieve a riskier portfolio, increase exposure to growth stocks or leverage, while for a more conservative approach, incorporate bonds or defensive stocks. Moving along the efficient frontier can help balance risk and return according to personal preferences. Once diversification issues are addressed, optimization can be pursued to align the portfolio with desired risk levels and improve expected returns.

Dividends Info

  • Apple Inc 0.40%
  • Microchip Technology Inc 2.60%
  • MPLX LP 6.90%
  • Microsoft Corporation 0.50%
  • Micron Technology Inc 0.50%
  • Invesco QQQ Trust 0.60%
  • ProShares UltraPro QQQ 1.20%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Growth Index Fund ETF Shares 0.50%
  • Weighted yield (per year) 0.92%

The portfolio's dividend yield is relatively low at 0.92%, reflecting its focus on growth stocks rather than income-generating assets. While growth stocks can offer substantial capital appreciation, incorporating higher-yielding investments could enhance income and provide stability during market downturns. Consider adding dividend-paying stocks or ETFs to balance the portfolio and generate a more consistent income stream. This approach can provide a safety net during periods of market volatility and support long-term wealth accumulation.

Ongoing product costs Info

  • Invesco QQQ Trust 0.20%
  • ProShares UltraPro QQQ 0.88%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Growth Index Fund ETF Shares 0.04%
  • Weighted costs total (per year) 0.21%

The portfolio's total expense ratio (TER) is 0.21%, which is relatively low and indicates cost-efficient management. The majority of costs come from the ProShares UltraPro QQQ with a 0.88% expense ratio. Keeping investment costs low is crucial for maximizing returns over time, as high fees can erode gains. While the current cost structure is favorable, regularly reviewing and managing costs can further enhance portfolio performance. Consider periodically assessing the expense ratios of all holdings and exploring more cost-effective alternatives if necessary.

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