Momentum-focused portfolio with high exposure to US equities and low diversification

Report created on Jul 29, 2025

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

This portfolio is heavily weighted towards momentum strategies within the US equity market, split across large, mid, and small-cap stocks. The significant allocation to the Invesco S&P 500® Momentum ETF indicates a focus on large-cap stocks that have shown strong recent performance. However, the portfolio's concentration in a single asset class and geographic region, alongside its allocation across market capitalizations, suggests limited diversification. This approach aligns with a growth-oriented strategy but carries higher volatility and sector-specific risks.

Growth Info

Historically, this portfolio has exhibited a Compound Annual Growth Rate (CAGR) of 21.29%, with a maximum drawdown of -33.26%. These figures suggest strong past performance but also highlight the portfolio's susceptibility to significant short-term losses. The days contributing most to returns are relatively few, indicating that the portfolio's gains are often concentrated in short bursts, a characteristic feature of momentum investing strategies.

Projection Info

Monte Carlo simulations project a wide range of outcomes, with the median scenario suggesting substantial growth. However, the reliance on historical data in these simulations means past performance is not a reliable indicator of future results. This method helps illustrate potential volatility and the range of outcomes but should be interpreted with caution, especially for portfolios focused on momentum, which can shift rapidly due to market sentiment changes.

Asset classes Info

  • Stocks
    100%

The portfolio's assets are entirely in stocks, with no allocation to bonds, real estate, or other asset classes that could provide income or reduce volatility. This singular focus enhances potential returns but also increases risk, especially in market downturns. Diversifying across asset classes can help mitigate these risks without necessarily compromising long-term growth potential.

Sectors Info

  • Financials
    21%
  • Technology
    19%
  • Consumer Discretionary
    14%
  • Industrials
    13%
  • Telecommunications
    10%
  • Consumer Staples
    9%
  • Health Care
    5%
  • Energy
    3%
  • Real Estate
    3%
  • Utilities
    2%

Sector allocation is concentrated in financial services, technology, and consumer cyclicals, which are typically volatile but offer high growth potential. This concentration could lead to higher portfolio volatility, particularly in response to economic cycles or sector-specific downturns. Broadening sector exposure could help stabilize returns over time.

Regions Info

  • North America
    99%

With 99% of assets in North America, the portfolio is highly exposed to US market dynamics and currency risk. This geographic concentration limits exposure to potential growth in other regions and increases vulnerability to US-specific economic fluctuations. Considering global diversification could reduce risk and tap into growth opportunities elsewhere.

Market capitalization Info

  • Mega-cap
    35%
  • Large-cap
    23%
  • Small-cap
    21%
  • Mid-cap
    18%
  • Micro-cap
    3%

The distribution across market capitalizations shows a balanced exposure to large, mid, small, and micro-cap stocks, which is positive for diversification within the equity component. However, the focus on momentum stocks across these segments may still lead to higher volatility, as these stocks are often more sensitive to market movements.

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 current portfolio's expected return is slightly below the optimal level identified through Efficient Frontier analysis. This suggests there's room for improvement in balancing risk and return. Adjusting the allocation could potentially increase returns for the same level of risk, enhancing the portfolio's efficiency without necessarily increasing exposure to volatility.

Dividends Info

  • Invesco S&P 500® Momentum ETF 0.60%
  • Invesco S&P MidCap Momentum ETF 0.70%
  • Invesco S&P SmallCap Momentum ETF 0.90%
  • Weighted yield (per year) 0.66%

The dividend yields, while modest, provide some income. However, the primary focus on growth through capital appreciation means dividends play a secondary role in this portfolio. Investors seeking regular income might consider higher-yielding assets or a greater emphasis on dividend-paying sectors.

Ongoing product costs Info

  • Invesco S&P 500® Momentum ETF 0.13%
  • Invesco S&P MidCap Momentum ETF 0.34%
  • Invesco S&P SmallCap Momentum ETF 0.39%
  • Weighted costs total (per year) 0.21%

The total expense ratio (TER) of 0.21% is relatively low, which is beneficial for long-term growth as it minimizes the drag on performance. Keeping costs low is crucial in maximizing returns, especially in strategies like momentum investing, where portfolio turnover can be higher.

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