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High-risk speculative portfolio with low diversification and concentrated in technology and healthcare sectors

Report created on Aug 1, 2024

Risk profile Info

7/7
Speculative
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

The portfolio is heavily concentrated in a few high-profile stocks, with Eli Lilly, NVIDIA, and AMD making up 80% of the holdings. This concentration exposes the portfolio to significant company-specific risks. The inclusion of two ETFs provides some diversification, but their impact is minimal due to their small allocation. Maintaining such a concentrated portfolio could result in high volatility. It's important to consider diversifying the portfolio to spread risk across more companies and sectors, which could help stabilize returns over time and reduce dependency on a few companies' performances.

Growth Info

Historically, this portfolio has shown a remarkable CAGR of 92.16%, indicating exceptional growth. However, this comes with a substantial max drawdown of -49.83%, highlighting the potential for significant losses. The fact that 90% of returns are concentrated in just 47 days suggests high volatility and reliance on a few big gains. Such performance is not sustainable for the long term, and while past performance is impressive, it is crucial to manage risk to avoid substantial losses. Balancing the portfolio with more stable investments could help mitigate extreme fluctuations in returns.

Projection Info

The Monte Carlo simulation, which uses random sampling to predict future returns, shows a wide range of possible outcomes for this portfolio. With a 5th percentile return of 2,303.21% and a 67th percentile of 96,467.1%, the potential for high returns is evident. However, the annualized return of 68.82% across all simulations indicates high variance and risk. It's important to remember that while simulations can provide insight into potential outcomes, they are not guarantees. Diversifying the portfolio could help achieve more consistent returns and reduce the likelihood of significant losses in adverse market conditions.

Asset classes Info

  • Stocks
    95%

The portfolio is overwhelmingly composed of stocks, accounting for 94.98% of the allocation, with a negligible amount in cash. This heavy reliance on equities suggests a high-risk, high-reward strategy, but it also increases vulnerability to market downturns. To mitigate this risk, consider incorporating other asset classes such as bonds or commodities, which can provide stability and act as a hedge against stock market volatility. A more balanced asset allocation could enhance the portfolio's resilience and provide more consistent returns over time.

Sectors Info

  • Technology
    51%
  • Health Care
    31%
  • Consumer Discretionary
    11%
  • Financials
    1%
  • Industrials
    1%

The sector allocation is heavily skewed towards technology (51.21%) and healthcare (30.60%), making the portfolio susceptible to sector-specific risks. While these sectors have shown strong growth, they can also experience significant downturns. The limited exposure to other sectors like consumer cyclicals and financial services further emphasizes the lack of diversification. To reduce sector risk, consider spreading investments across a broader range of industries. This can help capture growth opportunities in other areas and reduce the impact of negative developments within the concentrated sectors.

Regions Info

  • North America
    84%
  • Europe Developed
    11%

Geographically, the portfolio is predominantly focused on North America, with 83.67% of assets allocated there. This concentration exposes the portfolio to regional risks, such as economic downturns or policy changes in the U.S. and Canada. Although there is some exposure to Europe and minimal allocations to other regions, the portfolio could benefit from increased geographic diversification. By investing in a wider range of international markets, the portfolio can capture growth opportunities globally and reduce the impact of adverse events in any single region.

Dividends Info

  • Eli Lilly and Company 0.60%
  • Mercedes-Benz Group AG 10.20%
  • iShares MSCI World ETF 1.40%
  • Weighted yield (per year) 1.27%

The portfolio's dividend yield is modest at 1.27%, with Mercedes-Benz contributing the highest yield of 10.2%. While dividends can provide a steady income stream, the portfolio's reliance on high-growth stocks means dividends are not a primary focus. Investors seeking income may want to consider increasing exposure to dividend-paying stocks or funds. This could provide a more balanced approach, combining growth potential with regular income. However, it's important to weigh the trade-offs between growth and income when adjusting the portfolio's dividend strategy.

Ongoing product costs Info

  • iShares MSCI World ETF 0.24%
  • Weighted costs total (per year) 0.01%

The portfolio's costs are relatively low, with the iShares MSCI World ETF having an expense ratio of 0.24% and the Total TER at 0.01%. Low costs are advantageous as they help maximize net returns over time. Keeping investment costs low is a crucial aspect of portfolio management, as high fees can erode returns. It's important to regularly review the cost structure of the portfolio and consider reallocating to lower-cost options if necessary. This approach ensures that more of the portfolio's returns are retained by the investor, contributing to long-term growth.

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