A tech-focused high-risk portfolio with significant concentration in cybersecurity

Report created on Apr 29, 2025

Risk profile Info

6/7
Aggressive
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

This portfolio is heavily concentrated in technology, with 64.03% allocated to the First Trust NASDAQ Cybersecurity ETF and 22.18% in NVIDIA Corporation. The Schwab S&P 500 Index Fund provides a broader market exposure with 11.67%, while the Avantis U.S. Small Cap Value ETF adds a minor diversification at 2.12%. Compared to a balanced benchmark, this portfolio is tech-heavy and less diversified. This concentration can lead to higher volatility, especially if the tech sector faces downturns. To mitigate risk, consider diversifying by adding more non-tech assets or increasing allocations to existing diversified funds.

Growth Info

The portfolio has delivered an impressive Compound Annual Growth Rate (CAGR) of 30.58%, significantly outperforming typical market benchmarks. However, it also experienced a substantial maximum drawdown of -49.05%, indicating high volatility. This performance suggests that while the portfolio can generate high returns, it also carries substantial risk, especially during market downturns. For those seeking to maintain high returns while managing risk, it may be wise to gradually rebalance towards more stable sectors or funds that can cushion against downturns.

Projection Info

Monte Carlo simulations, which use historical data to predict future outcomes, show a wide range of potential returns. The portfolio's projected annualized return is 36.74%, with 995 out of 1,000 simulations showing positive returns. This suggests a high likelihood of future gains, but it's important to remember that simulations are not guarantees. The wide range of outcomes highlights the portfolio's risk, with potential for both significant gains and losses. Regularly reviewing and adjusting allocations based on market conditions can help manage this risk.

Asset classes Info

  • Stocks
    100%

The portfolio is entirely composed of equities, which can lead to significant growth but also increases exposure to market volatility. A more balanced allocation across different asset classes, such as bonds or real estate, could provide stability and reduce risk. Compared to a diversified benchmark, this portfolio lacks the cushion that other asset classes can provide during economic downturns. Introducing a mix of fixed-income securities or alternative investments could enhance diversification and improve risk-adjusted returns.

Sectors Info

  • Technology
    84%
  • Industrials
    7%
  • Financials
    2%
  • Health Care
    1%
  • Consumer Discretionary
    1%
  • Telecommunications
    1%
  • Consumer Staples
    1%
  • Energy
    1%

With 84% of the portfolio invested in technology, it is heavily skewed towards this sector. This concentration can lead to high returns during tech booms but also poses a risk during sector-specific downturns or regulatory challenges. The remaining allocations in industrials, financial services, and other minor sectors do little to offset this imbalance. To enhance sector diversification, consider increasing exposure to under-represented sectors like healthcare or consumer goods, which can provide more stability and reduce overall portfolio risk.

Regions Info

  • North America
    88%
  • Asia Emerging
    5%
  • Europe Developed
    4%
  • Africa/Middle East
    2%
  • Japan
    2%

The portfolio is predominantly focused on North America, with 88% of assets allocated there. While this aligns with the client's USA region, it limits exposure to international markets that can offer growth opportunities and diversification benefits. Emerging markets and developed economies outside of North America can provide valuable diversification and reduce reliance on the U.S. market. Expanding geographic exposure to regions like Asia or Europe may help balance the portfolio and capture global growth trends.

Market capitalization Info

  • Mega-cap
    37%
  • Large-cap
    29%
  • Mid-cap
    26%
  • Small-cap
    5%
  • Micro-cap
    2%

The portfolio is well diversified across market capitalizations, with a mix of mega, big, medium, small, and micro-cap stocks. This distribution allows for exposure to both established companies and growth potential in smaller firms. However, the relatively low allocation to small and micro-cap stocks suggests limited exposure to high-growth opportunities. Increasing investments in smaller-cap stocks could enhance growth potential, albeit with increased volatility. Balancing these allocations can optimize risk and return.

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's current allocation may not be on the Efficient Frontier, which represents the best possible risk-return trade-off. By optimizing the allocation among existing assets, it's possible to achieve a more favorable balance of risk and return. This involves adjusting weights to maximize returns for a given risk level or minimize risk for a desired return. However, it's important to note that optimization is based on historical data and assumptions, which may not predict future performance. Regular reviews and adjustments are essential.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.90%
  • First Trust NASDAQ Cybersecurity ETF 0.20%
  • Schwab S&P 500 Index Fund 1.30%
  • Weighted yield (per year) 0.32%

The portfolio's total dividend yield is relatively low at 0.32%, reflecting its growth-oriented focus. The Avantis U.S. Small Cap Value ETF contributes the highest yield at 1.90%, while the First Trust NASDAQ Cybersecurity ETF offers just 0.20%. For investors seeking income, increasing exposure to higher-yielding assets could enhance cash flow. However, it's important to balance this with growth objectives, as high-dividend stocks may offer lower capital appreciation. Evaluating dividend growth potential could be a strategic alternative.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • First Trust NASDAQ Cybersecurity ETF 0.59%
  • Weighted costs total (per year) 0.38%

The portfolio's total expense ratio (TER) is 0.38%, which is reasonable given the focus on specialized ETFs like the First Trust NASDAQ Cybersecurity ETF with a 0.59% TER. Managing costs is crucial for long-term performance, as fees can erode returns over time. While the current costs are not excessive, exploring lower-cost alternatives or negotiating fees with fund providers could enhance net returns. Keeping an eye on fees and making cost-effective choices will support better long-term outcomes.

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