High Growth Potential Portfolio with Low Diversification and Moderate Risk Suited for Aggressive Investors

Report created on Dec 3, 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 is composed entirely of ETFs, with a strong focus on growth-oriented funds. Invesco QQQ Trust holds the largest share at 25%, followed by iShares Russell Top 200 Growth ETF at 20%. The portfolio lacks diversity, heavily leaning towards momentum and growth strategies. This composition suggests a high-risk, high-reward approach, potentially leading to significant gains or losses. To optimize, consider incorporating different asset classes, such as bonds or international equities, to balance risk and reward.

Growth Info

Historically, this portfolio has performed impressively with a compound annual growth rate of 21.79%. However, it also experienced a maximum drawdown of -32.49%, indicating significant volatility. This performance suggests a strong potential for high returns but at the cost of substantial risk. For investors comfortable with such volatility, maintaining this growth-focused strategy could be beneficial. However, to reduce potential losses during market downturns, consider diversifying into more stable investments.

Projection Info

Using a Monte Carlo simulation, which models various potential future outcomes, the portfolio shows promising growth. With 1,000 simulations, the median outcome predicts a 932.53% return on a hypothetical initial investment. This suggests a high probability of positive returns, with 992 simulations showing gains. However, the range of outcomes highlights the inherent risk. For those seeking to maximize returns while managing risk, gradually diversifying into less correlated assets could be advantageous.

Asset classes Info

  • Stocks
    100%

The portfolio is almost entirely invested in stocks, with a negligible cash component. This heavy stock allocation aligns with a high-risk, high-return strategy, suitable for aggressive investors. While this can lead to substantial gains, it also exposes the portfolio to significant market volatility. To mitigate risk, consider incorporating alternative asset classes like bonds or real estate, which can provide stability and reduce overall volatility.

Sectors Info

  • Technology
    31%
  • Consumer Discretionary
    14%
  • Industrials
    14%
  • Financials
    13%
  • Telecommunications
    9%
  • Health Care
    7%
  • Consumer Staples
    5%
  • Energy
    2%
  • Basic Materials
    2%
  • Real Estate
    2%
  • Utilities
    1%

Sector allocation is concentrated, with technology leading at 31.41%, followed by consumer cyclicals and industrials. This concentration in a few sectors increases the portfolio's risk, as it may be overly exposed to sector-specific downturns. To enhance diversification and reduce risk, consider spreading investments across a broader range of sectors. This can help cushion the portfolio against sector-specific volatility and improve long-term stability.

Regions Info

  • North America
    84%
  • Europe Developed
    1%

Geographically, the portfolio is predominantly invested in North America, accounting for 83.85% of the allocation. This heavy concentration limits exposure to global markets and increases vulnerability to regional economic fluctuations. To achieve better diversification, consider allocating a portion of the portfolio to international markets. This can provide exposure to different economic cycles and growth opportunities, potentially enhancing overall portfolio resilience.

Redundant positions Info

  • iShares Russell 2000 Growth ETF
    iShares S&P Small-Cap 600 Growth ETF
    iShares S&P Mid-Cap 400 Growth ETF
    High correlation
  • Invesco QQQ Trust
    iShares Russell Top 200 Growth ETF
    High correlation

The portfolio contains several highly correlated assets, particularly among small-cap and growth ETFs. This correlation suggests limited diversification benefits, as these assets tend to move in the same direction. To improve diversification, consider reducing exposure to overlapping ETFs and incorporating assets with lower correlations. This can help balance the portfolio, potentially reducing risk and enhancing returns over the long term.

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 the portfolio, focus on reducing overlapping assets that offer no diversification benefits. By removing highly correlated ETFs, the portfolio can achieve better balance and potentially reduce risk. To adjust risk levels, consider moving along the efficient frontier by incorporating more conservative or riskier assets as desired. This strategic adjustment can help align the portfolio with specific risk tolerance and financial goals, enhancing overall performance.

Dividends Info

  • iShares S&P Mid-Cap 400 Growth ETF 0.80%
  • iShares S&P Small-Cap 600 Growth ETF 0.90%
  • iShares Russell 2000 Growth ETF 0.60%
  • iShares Russell Mid-Cap Growth ETF 0.40%
  • iShares Russell Top 200 Growth ETF 0.50%
  • Invesco QQQ Trust 0.60%
  • Invesco S&P 500® Momentum ETF 0.40%
  • Invesco S&P MidCap Momentum ETF 0.30%
  • Invesco S&P SmallCap Momentum ETF 0.50%
  • Weighted yield (per year) 0.50%

The portfolio's dividend yield is relatively low at 0.5%, reflecting its focus on growth-oriented investments rather than income generation. While this aligns with a growth strategy, it may not suit investors seeking regular income. For those looking to increase income, consider adding dividend-focused investments. This can provide a steady income stream, complementing the growth potential of the current portfolio.

Ongoing product costs Info

  • iShares S&P Mid-Cap 400 Growth ETF 0.17%
  • iShares S&P Small-Cap 600 Growth ETF 0.18%
  • iShares Russell 2000 Growth ETF 0.24%
  • iShares Russell Mid-Cap Growth ETF 0.23%
  • iShares Russell Top 200 Growth ETF 0.20%
  • Invesco QQQ Trust 0.20%
  • 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) 0.23%

The portfolio's total expense ratio stands at 0.23%, which is relatively low and cost-effective. This is beneficial for long-term growth, as lower costs can significantly impact net returns over time. Maintaining a low-cost structure is essential for optimizing portfolio performance. To further reduce costs, regularly review and compare expense ratios of current holdings with potential alternatives, ensuring the portfolio remains cost-efficient.

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