High-Risk Growth Portfolio with Low Diversification and Heavy Technology Exposure
Report created on Jul 31, 2024Risk profile
5/7
Diversification profile
2/5
Positions
-
QQ Invesco NASDAQ 100 ETF
QQQM - US46138G6492 50.00% -
SP SPDR S&P 500 ETF Trust
SPY - US78462F1030 50.00%
This portfolio is composed of two ETFs: Invesco NASDAQ 100 ETF and SPDR S&P 500 ETF Trust, each making up 50% of the total allocation. The portfolio is heavily weighted towards equities, with a very small portion in cash. This means that the portfolio is highly exposed to market fluctuations and lacks diversification across different asset classes, which could increase volatility and risk. To mitigate this risk, consider adding other asset classes like bonds or commodities.
Growth
Historically, the portfolio has shown a strong performance with a CAGR of 13.5%. However, it also experienced a significant maximum drawdown of -29.57%, indicating that it can be quite volatile. The fact that 90% of returns were made in just 15 days further emphasizes the portfolio's high-risk nature. Investors should be prepared for significant fluctuations and consider whether they can tolerate such volatility.
Projection
Using a Monte Carlo simulation with 1,000 iterations, the portfolio's projected annualized return is 15.47%. The end portfolio values vary widely, with the 5th percentile at 67.06% and the 67th percentile at 727.19%. This wide range of outcomes indicates high uncertainty and potential for both significant gains and losses. Investors should be cautious and consider their risk tolerance when relying on these projections.
Asset classes
- Stocks 100%
The portfolio is almost entirely allocated to stocks, with 99.92% in equities and a mere 0.08% in cash. This lack of diversification can lead to increased risk, as the portfolio is heavily dependent on the performance of the stock market. To reduce risk and achieve a more balanced portfolio, consider incorporating other asset classes such as bonds, real estate, or commodities.
Sectors
- Technology 40%
- Telecommunications 13%
- Consumer Discretionary 12%
- Health Care 9%
- Financials 7%
- Industrials 6%
- Consumer Staples 6%
- Energy 2%
- Utilities 2%
- Basic Materials 2%
- Real Estate 1%
The sector allocation is heavily skewed towards technology, which makes up nearly 40% of the portfolio. Other significant sectors include Communication Services, Consumer Cyclicals, and Healthcare. While these sectors have performed well recently, overexposure to a single sector can increase risk. Diversifying into other sectors can help mitigate this risk and provide more stable returns.
Regions
- North America 98%
- Europe Developed 1%
Geographically, the portfolio is overwhelmingly concentrated in North America, which accounts for 98.26% of the allocation. There is minimal exposure to other regions such as Europe, Asia, and Latin America. This lack of geographic diversification can increase risk, as the portfolio is highly dependent on the North American market. Consider adding international assets to achieve better geographic balance.
Dividends
- Invesco NASDAQ 100 ETF 0.70%
- SPDR S&P 500 ETF Trust 1.30%
- Weighted yield (per year) 1.00%
The portfolio's dividend yield is not specified, but given the high allocation to technology and growth stocks, it is likely to be relatively low. Growth stocks typically reinvest earnings into the business rather than paying high dividends. If generating income is a goal, consider adding dividend-paying stocks or ETFs to the portfolio.
Ongoing product costs
- Invesco NASDAQ 100 ETF 0.15%
- SPDR S&P 500 ETF Trust 0.10%
- Weighted costs total (per year) 0.12%
The portfolio has a total expense ratio (TER) of 0.12%, which is relatively low and cost-effective. The Invesco NASDAQ 100 ETF has an expense ratio of 0.15%, while the SPDR S&P 500 ETF Trust has an expense ratio of 0.1%. Keeping costs low is essential for maximizing returns, so this aspect of the portfolio is well-managed. Continue to monitor and minimize costs to enhance overall performance.
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