High-Risk Growth Portfolio with Low Diversification and Strong Technology Focus
Report created on Dec 3, 2024Risk profile
5/7
Diversification profile
2/5
Positions
-
QQ Invesco NASDAQ 100 ETF
QQQM - US46138G6492 50.00% -
VT Vanguard Total Stock Market Index Fund ETF Shares
VTI - US9229087690 50.00%
The portfolio is evenly split between two ETFs: Invesco NASDAQ 100 and Vanguard Total Stock Market Index Fund. This results in a low diversification classification, meaning the portfolio might be more sensitive to market fluctuations. With a risk score of 5 out of 7, it's positioned on the riskier side of the spectrum. The total expense ratio is quite low at 0.09%, which is great for long-term growth as it minimizes costs. However, the heavy reliance on just two funds could limit exposure to other potentially beneficial asset classes.
Growth
Historically, the portfolio has performed well, with a compound annual growth rate of 16.07%. This indicates strong past performance, especially given the market's volatility. However, a maximum drawdown of -30.14% suggests periods of significant losses, which can be concerning for risk-averse investors. The fact that 90% of returns come from just 19 days highlights the importance of staying invested during volatile times to capture the best days. This performance underscores the potential rewards but also the risks associated with this growth-focused strategy.
Projection
Using a Monte Carlo simulation with 1,000 iterations, the portfolio shows a wide range of potential future outcomes. A Monte Carlo simulation uses random sampling to project future returns, offering insights into potential risks and rewards. The median result suggests a 674.8% growth, while the most optimistic scenarios predict over 1,000% returns. It's encouraging that 995 out of 1,000 simulations show positive returns, with an annualized return of 17.55%. Despite the promising outlook, the variance in outcomes highlights the importance of risk management in investment strategy.
Asset classes
- Stocks 100%
The portfolio is heavily weighted in stocks, with 99.87% of assets in equities and a negligible amount in cash. This allocation is suitable for investors seeking high growth, as stocks generally offer higher returns over the long term compared to other asset classes. However, the lack of diversification into bonds or other asset classes could expose the portfolio to higher volatility. To balance risk and reward, integrating other asset classes could provide stability and reduce the impact of market downturns.
Sectors
- Technology 41%
- Telecommunications 12%
- Consumer Discretionary 12%
- Health Care 9%
- Financials 7%
- Industrials 6%
- Consumer Staples 6%
- Energy 2%
- Utilities 2%
- Basic Materials 2%
- Real Estate 2%
The sector allocation is heavily skewed towards technology, which makes up 40.91% of the portfolio. While technology has been a strong performer historically, this concentration increases exposure to sector-specific risks. Other sectors like communication services and consumer cyclicals also have significant allocations. A more balanced sector distribution could mitigate potential downturns in any single sector. Diversifying sector exposure can help smooth out returns and reduce the impact of industry-specific volatility, enhancing the portfolio's resilience.
Regions
- North America 99%
- Europe Developed 1%
Geographically, the portfolio is overwhelmingly concentrated in North America, with 98.55% of assets allocated there. This concentration limits exposure to international markets, which could offer growth opportunities and diversification benefits. A more geographically diverse portfolio could reduce the impact of regional economic downturns and capture growth in emerging markets. Broadening the geographic allocation can enhance the portfolio's resilience and provide access to a wider range of investment 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 optimization chart suggests that while the portfolio is on a growth trajectory, there's room for improvement in diversification. To achieve a riskier portfolio, increasing equity exposure or focusing on high-growth sectors could be considered. Conversely, to create a more conservative portfolio, incorporating bonds or other low-risk assets would be beneficial. Moving along the efficient frontier can help balance risk and return, optimizing the portfolio's performance. It's crucial to align these adjustments with personal risk tolerance and investment goals.
Dividends
- Invesco NASDAQ 100 ETF 0.60%
- Vanguard Total Stock Market Index Fund ETF Shares 1.20%
- Weighted yield (per year) 0.90%
The portfolio's dividend yield is relatively low at 0.9%, reflecting its focus on growth rather than income. The Invesco NASDAQ 100 ETF contributes a 0.6% yield, while the Vanguard Total Stock Market Index Fund offers a 1.2% yield. While dividends can provide a steady income stream, this portfolio prioritizes capital appreciation. Investors seeking higher income may want to consider diversifying into dividend-focused investments. Balancing growth and income can enhance total returns and provide a more stable cash flow.
Ongoing product costs
- Invesco NASDAQ 100 ETF 0.15%
- Vanguard Total Stock Market Index Fund ETF Shares 0.03%
- Weighted costs total (per year) 0.09%
With a total expense ratio of 0.09%, the portfolio is cost-effective, which is a positive aspect for long-term investors. Low costs mean more of the portfolio's returns are retained, contributing to compounding growth over time. The Invesco NASDAQ 100 ETF has an expense ratio of 0.15%, and the Vanguard Total Stock Market Index Fund is even lower at 0.03%. Keeping costs low is crucial for maximizing returns, and this portfolio does well in that regard. However, the limited diversification may necessitate additional investments, potentially increasing costs.
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