A high-risk aggressive portfolio with significant tech exposure and moderate diversification

Report created on Dec 20, 2024

Risk profile Info

6/7
Aggressive
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

The portfolio is heavily weighted towards equities, with ETFs and common stocks making up the entirety of its composition. The largest holding is the Schwab U.S. Large-Cap Growth ETF at over 30%, indicating a focus on growth. This composition suggests an aggressive investment strategy, often pursued by those seeking high returns. Compared to common benchmarks, this portfolio leans heavily towards growth-oriented assets, which can lead to higher volatility. Consider balancing growth with stability by exploring additional asset classes, such as bonds, which could provide a buffer during market downturns.

Growth Info

Historically, the portfolio has demonstrated impressive growth with a Compound Annual Growth Rate (CAGR) of 39.36%, indicating strong past performance. However, it also experienced a significant maximum drawdown of -72.26%, highlighting potential volatility. This duality underscores the importance of understanding that past performance doesn't guarantee future results. While the returns have been high, the risk of large losses is also present. To mitigate potential risks, consider diversifying further or incorporating assets with lower volatility to balance the portfolio.

Projection Info

Forward projections using Monte Carlo simulations suggest varied outcomes, with a median potential loss of 27.55% and a possibility of substantial gains. Monte Carlo simulation is a statistical method that uses historical data to predict future performance, but it's important to note that it's not foolproof. The wide range of outcomes reflects the high-risk nature of the portfolio. To improve future projections, consider reducing exposure to highly volatile assets and increasing the proportion of stable, income-generating investments to enhance predictability.

Asset classes Info

  • Stocks
    100%

With nearly 100% of the portfolio invested in stocks, there is a lack of diversification across asset classes. This concentration increases the portfolio's sensitivity to equity market fluctuations. Common benchmarks typically include a mix of stocks, bonds, and cash to mitigate risk. By introducing fixed-income assets or alternative investments, you can achieve a more balanced portfolio. This diversification can help reduce overall portfolio risk and provide more consistent returns over time.

Sectors Info

  • Technology
    30%
  • Basic Materials
    21%
  • Telecommunications
    12%
  • Health Care
    9%
  • Consumer Discretionary
    8%
  • Financials
    8%
  • Industrials
    5%
  • Consumer Staples
    4%
  • Energy
    3%
  • Utilities
    1%
  • Real Estate
    1%

The portfolio is heavily concentrated in the technology sector, accounting for nearly 30% of the total allocation. While this may drive growth, it also exposes the portfolio to sector-specific risks, such as regulatory changes or technological disruptions. Compared to benchmarks, this sectoral allocation is skewed, potentially leading to higher volatility. To mitigate these risks, consider reallocating some investments into underrepresented sectors like consumer defensive or utilities, which can provide stability during economic downturns.

Regions Info

  • North America
    92%
  • Asia Emerging
    6%
  • Europe Developed
    1%

Geographically, the portfolio is overwhelmingly focused on North America, with over 92% exposure. This concentration limits the benefits of international diversification, which can help reduce risk by spreading investments across different economic regions. Benchmarks often include a more balanced geographic distribution, incorporating emerging markets and developed regions outside North America. To enhance geographic diversification, consider increasing exposure to regions like Europe or Asia, which may offer growth opportunities and risk mitigation.

Redundant positions Info

  • iShares Russell Top 200 ETF
    Vanguard S&P 500 ETF
    Schwab U.S. Large-Cap Growth ETF
    Vanguard Total World Stock Index Fund ETF Shares
    High correlation

The portfolio contains highly correlated assets, particularly among U.S. large-cap ETFs. High correlation means these assets tend to move in the same direction, which can limit diversification benefits during market downturns. Diversification aims to reduce risk by holding assets that don't move in tandem. To improve diversification, consider reducing exposure to overlapping assets and introducing investments with lower correlation, such as international stocks or bonds, to enhance risk management.

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 could benefit from optimization using the Efficient Frontier, which aims to achieve the best possible risk-return ratio. This involves adjusting the current asset allocation to maximize returns for a given level of risk. By removing highly correlated assets and considering a more diverse mix, the portfolio can be steered towards a more efficient allocation. Remember, efficiency refers to optimizing returns relative to risk, not necessarily achieving the highest returns or the most diversification.

Dividends Info

  • iShares Russell Top 200 ETF 0.80%
  • Invesco S&P 500® Equal Weight ETF 1.20%
  • Schwab U.S. Dividend Equity ETF 3.70%
  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • Vanguard S&P 500 ETF 0.90%
  • Vanguard Total World Stock Index Fund ETF Shares 1.20%
  • Weighted yield (per year) 0.85%

The portfolio's overall dividend yield is modest at 0.85%, with the Schwab U.S. Dividend Equity ETF contributing significantly. Dividends can provide a steady income stream and help offset market volatility. Given the aggressive nature of the portfolio, increasing the allocation to high-dividend-yielding assets could enhance income potential and provide a cushion during downturns. Consider gradually shifting some assets towards dividend-focused investments to balance growth with income generation.

Ongoing product costs Info

  • iShares Russell Top 200 ETF 0.15%
  • Invesco S&P 500® Equal Weight ETF 0.20%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total World Stock Index Fund ETF Shares 0.07%
  • Weighted costs total (per year) 0.04%

The portfolio's total expense ratio (TER) is impressively low at 0.04%, which is beneficial for long-term performance as lower costs mean more of your returns stay in your pocket. This cost efficiency aligns with best practices in portfolio management, where minimizing fees can significantly enhance net returns over time. Continue to monitor and evaluate the cost structures of your investments, ensuring they remain competitive and aligned with your financial goals.

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