Growth-Oriented Portfolio with High Risk and Low Diversification Focused on North American Stocks

Report created on Dec 4, 2024

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

The portfolio consists of two ETFs, each making up 50% of the total allocation, resulting in low diversification. This composition indicates a concentrated investment strategy, primarily focused on growth. While ETFs are generally diversified, having only two funds limits exposure to different asset classes and sectors. To enhance diversification, consider adding more varied investments that can spread risk and potentially improve returns over time.

Growth Info

Historically, the portfolio has shown impressive performance with a compound annual growth rate (CAGR) of 15.63%. However, it's important to note the maximum drawdown of -32.78%, highlighting the potential for significant short-term losses. The performance has been driven by a small number of days, emphasizing volatility. While past performance is not indicative of future results, maintaining awareness of this volatility is crucial for managing expectations and aligning with investment goals.

Projection Info

Using a Monte Carlo simulation with 1,000 iterations, the portfolio's future performance was projected. This simulation provides a range of possible outcomes based on different market scenarios. The median return was 638.46%, with a 5th percentile return of 116.19%, indicating the potential for both substantial gains and moderate losses. While these projections offer insights, they are hypothetical and should be used as one of many tools in decision-making.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily weighted in stocks, comprising 99.78% of the total allocation, with a small cash position. This high concentration in equities aligns with a growth-oriented strategy but increases exposure to market volatility. To balance risk, consider incorporating other asset classes, such as bonds or real estate, to provide stability and reduce dependence on stock market performance.

Sectors Info

  • Technology
    41%
  • Consumer Discretionary
    12%
  • Telecommunications
    11%
  • Financials
    10%
  • Health Care
    9%
  • Industrials
    6%
  • Consumer Staples
    4%
  • Energy
    2%
  • Real Estate
    2%
  • Basic Materials
    2%
  • Utilities
    1%

Sector allocation is heavily skewed towards technology, making up 41.48% of the portfolio. This concentration can increase risk if the tech sector underperforms. While technology has been a strong performer, it's important to diversify into other sectors like healthcare or financial services to mitigate sector-specific risks. A more balanced sector allocation can provide resilience against market fluctuations.

Regions Info

  • North America
    100%

Geographically, the portfolio is almost entirely invested in North America, accounting for 99.69% of the allocation. This lack of international exposure limits potential benefits from global market growth and diversification. To reduce geographic risk, consider adding investments from other regions. This can help capture opportunities in diverse markets and protect against downturns in the North American economy.

Redundant positions Info

  • iShares Core S&P 500 ETF
    Vanguard Growth Index Fund ETF Shares
    High correlation

The assets in the portfolio, namely the iShares Core S&P 500 ETF and Vanguard Growth Index Fund ETF Shares, are highly correlated. This means they tend to move in the same direction, offering limited diversification benefits. To improve the portfolio's resilience, consider adding assets with lower correlations. This can help smooth returns over time and reduce the impact of market volatility on the overall portfolio.

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.

Before optimizing, focus on reducing overlapping assets that don't contribute to diversification. Moving along the efficient frontier can help achieve a riskier or more conservative portfolio. To lower risk, consider adding bonds or other low-correlation assets. For a more aggressive approach, increase exposure to growth-oriented equities. Balancing risk and return is key to aligning the portfolio with financial goals.

Dividends Info

  • iShares Core S&P 500 ETF 1.20%
  • Vanguard Growth Index Fund ETF Shares 0.50%
  • Weighted yield (per year) 0.85%

The portfolio has a total dividend yield of 0.85%, with the iShares Core S&P 500 ETF yielding 1.2% and the Vanguard Growth Index Fund ETF yielding 0.5%. While these yields provide some income, they are relatively low for income-focused investors. If income generation is a goal, consider incorporating higher-yielding investments. This can enhance cash flow and provide a buffer during market downturns.

Ongoing product costs Info

  • iShares Core S&P 500 ETF 0.03%
  • Vanguard Growth Index Fund ETF Shares 0.04%
  • Weighted costs total (per year) 0.04%

The portfolio's total expense ratio is 0.04%, which is very low and cost-efficient. This low cost is beneficial for long-term growth, as high fees can erode returns over time. Maintaining a focus on cost-effective investments can help maximize net returns. However, while keeping costs low is important, it should not come at the expense of diversification and risk management.

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