High Risk Growth Portfolio with Strong Technology Focus and Limited Geographic Diversification

Report created on Nov 22, 2024

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

The portfolio is composed of eight ETFs, with a heavy emphasis on technology and healthcare sectors. The Vanguard S&P 500 UCITS Acc holds the largest share, contributing to a well-rounded exposure to the U.S. market. This composition suggests a growth-oriented approach, with a moderate diversification across sectors. While the focus on technology can drive high returns, it also introduces volatility. A more balanced sector allocation could enhance stability. Consider incorporating additional sectors to spread risk and maintain growth potential.

Growth Info

Historically, the portfolio has demonstrated impressive performance, with a CAGR of 16.64%. This indicates strong growth potential, although the maximum drawdown of -32.22% reflects significant volatility. The high returns are driven by the substantial allocation to technology, which can be both a strength and a weakness. It's important to be prepared for fluctuations, as the portfolio's high-risk nature might not suit all investors. To mitigate this, consider diversifying into sectors with lower volatility, potentially improving the risk-return balance over time.

Projection Info

A Monte Carlo simulation, using a hypothetical initial investment, projects varied outcomes for the portfolio. With 1,000 simulations, the median return is 515.27%, while the 5th percentile is 45.93%, indicating potential for both high returns and losses. This suggests that while the portfolio could perform exceptionally well, there's also a risk of underperformance. The simulation highlights the importance of aligning investments with risk tolerance. For those seeking stability, consider adjusting the portfolio to include more conservative assets, reducing the potential for extreme outcomes.

Asset classes Info

  • Stocks
    100%

The portfolio is overwhelmingly invested in stocks, comprising 99.87% of the total allocation. This high equity exposure aligns with a growth strategy but also increases risk. The minimal allocation to other asset classes, such as bonds or cash, limits the portfolio's ability to weather market downturns. To reduce risk, consider diversifying into bonds or other fixed-income assets. This could provide a buffer during market volatility, ensuring a more stable return profile. Balancing equity exposure with safer assets can help achieve long-term financial goals.

Sectors Info

  • Technology
    56%
  • Health Care
    18%
  • Industrials
    6%
  • Financials
    5%
  • Consumer Discretionary
    4%
  • Telecommunications
    3%
  • Utilities
    3%
  • Consumer Staples
    2%
  • Real Estate
    1%
  • Energy
    1%
  • Basic Materials
    1%

Technology dominates the sector allocation, making up 56.14% of the portfolio. This focus on tech can drive significant growth, but also exposes the portfolio to sector-specific risks. Healthcare is the second-largest sector, offering some diversification. However, other sectors are underrepresented, which could limit the portfolio's resilience in market fluctuations. Diversifying into additional sectors, such as consumer staples or utilities, could provide stability and reduce risk. A broader sector allocation can help mitigate the impact of downturns in any single industry.

Regions Info

  • North America
    83%
  • Europe Developed
    9%
  • Japan
    3%
  • Asia Developed
    1%
  • Asia Emerging
    1%
  • Latin America
    1%

Geographically, the portfolio is heavily weighted towards North America, with 82.96% exposure. This concentration can benefit from the strong performance of U.S. markets but also introduces regional risk. Europe Developed and Japan provide some diversification, though their impact is limited. Expanding geographic exposure could enhance diversification and reduce dependency on a single region. Consider increasing allocations to emerging markets or other developed regions to capture global growth opportunities and balance regional risks.

Redundant positions Info

  • iShares S&P 500 USD Information Technology Sector UCITS
    Xtrackers MSCI World Information Technology UCITS ETF 1C
    L&G Artificial Intelligence UCITS ETF
    iShares Automation & Robotics UCITS ETF USD (Acc)
    High correlation

The portfolio contains highly correlated assets, particularly within the technology sector. This correlation means that these assets tend to move in the same direction, which can amplify both gains and losses. While this can be beneficial in a rising market, it increases risk during downturns. Reducing correlation by diversifying into less related sectors or asset classes can help stabilize returns. Consider adding assets with low correlation to existing holdings to enhance diversification and reduce the impact of market volatility.

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 currently has overlapping, highly correlated assets, particularly in the technology sector. Optimizing the portfolio isn't recommended until addressing these correlations. A more balanced approach could be achieved by diversifying into less correlated sectors or asset classes. Moving along the efficient frontier, investors can adjust their portfolio to become riskier or more conservative. Reducing correlation would allow for better optimization opportunities in the future, potentially improving the risk-return profile. Focus on diversification before attempting further optimization.

Dividends Info

  • iShares Global Clean Energy UCITS 0.40%
  • Weighted yield (per year) 0.01%

The portfolio's dividend yield is minimal, with a total yield of 0.01%. This low yield reflects the growth-oriented nature of the portfolio, prioritizing capital appreciation over income generation. While this strategy can lead to higher long-term returns, it may not suit investors seeking regular income. To increase yield, consider incorporating dividend-paying stocks or ETFs into the portfolio. This could provide a steady income stream, complementing the growth potential of existing holdings and improving overall return stability.

Ongoing product costs Info

  • iShares Automation & Robotics UCITS ETF USD (Acc) 0.40%
  • iShares Global Clean Energy UCITS 0.65%
  • iShares S&P 500 USD Information Technology Sector UCITS 0.15%
  • Vanguard S&P 500 UCITS Acc 0.07%
  • Xtrackers MSCI World Momentum UCITS ETF 0.25%
  • Xtrackers MSCI World Health Care UCITS ETF 1C 0.25%
  • Xtrackers MSCI World Information Technology UCITS ETF 1C 0.25%
  • L&G Artificial Intelligence UCITS ETF 0.49%
  • Weighted costs total (per year) 0.26%

The portfolio's total expense ratio (TER) is 0.26%, which is relatively low, indicating cost-efficient management. The Vanguard S&P 500 UCITS Acc offers the lowest cost at 0.07%, contributing to the overall affordability. Higher-cost ETFs, like iShares Global Clean Energy UCITS at 0.65%, could be reviewed for cost-effectiveness. While costs are important, they should be balanced against potential returns. Maintaining a low-cost portfolio helps maximize net returns. Regularly reviewing and optimizing costs can ensure the portfolio remains efficient and aligned with financial goals.

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