High-Risk Aggressive Portfolio with Limited Diversification and High Volatility

Report created on Dec 3, 2024

Risk profile Info

6/7
Aggressive
Less risk More risk

Diversification profile Info

1/5
Single-Focused
Less diversification More diversification

Positions

This portfolio consists of two leveraged ETFs, ProShares UltraPro S&P500 and Direxion Daily 20+ Year Treasury Bull 3X Shares, making up 75% and 25% of the portfolio, respectively. The high concentration in just two ETFs indicates a single-focused diversification strategy. While this approach may yield high returns, it also introduces significant risk due to the lack of diversification across different asset classes and sectors. A more balanced allocation could potentially reduce risk, providing a more stable performance over time.

Growth Info

With a hypothetical initial investment, the portfolio has demonstrated a historical CAGR of 26.76%, indicating strong past performance. However, the portfolio also experienced a maximum drawdown of -64.36%, highlighting its vulnerability to significant losses during market downturns. The concentration of returns in just 30 days suggests that the portfolio's performance is heavily reliant on a few high-volatility periods. To mitigate this risk, consider diversifying into assets with more stable performance characteristics.

Projection Info

Using a Monte Carlo simulation with 1,000 iterations, the portfolio's future performance was projected, assuming a hypothetical initial investment. The analysis revealed a wide range of potential outcomes, with a 5th percentile loss of -92.28% and a 67th percentile gain of 349.56%. The median return was 86.17%, with an annualized return of 17.3% across all simulations. This volatility underscores the importance of considering both potential gains and losses. A more diversified portfolio could provide more consistent outcomes.

Asset classes Info

  • Stocks
    56%
  • Cash
    26%
  • Bonds
    19%

The portfolio is heavily weighted towards stocks, making up 55.56%, with cash and bonds comprising 25.89% and 18.55%, respectively. This asset class distribution aligns with an aggressive risk profile, aiming for high returns. However, the limited exposure to bonds and cash increases volatility. To reduce risk while maintaining growth potential, consider a more balanced allocation across asset classes, incorporating a larger proportion of bonds or alternative investments for stability.

Sectors Info

  • Technology
    25%
  • Financials
    10%
  • Consumer Discretionary
    8%
  • Health Care
    8%
  • Telecommunications
    7%
  • Industrials
    6%
  • Consumer Staples
    4%
  • Energy
    3%
  • Utilities
    2%
  • Real Estate
    2%
  • Basic Materials
    1%

The portfolio's sector allocation is concentrated, with technology leading at 24.57%, followed by financial services and consumer cyclicals. This focus on a few sectors increases vulnerability to sector-specific downturns. Diversifying across a broader range of sectors could reduce risk and enhance resilience against market fluctuations. An even distribution across various sectors would help in achieving more stable returns, protecting against the underperformance of any single sector.

Regions Info

  • North America
    75%

Geographically, the portfolio is predominantly invested in North America, with 74.57% exposure, and negligible allocations to Europe and Asia. This concentration in a single region exposes the portfolio to region-specific risks. To mitigate these risks, consider increasing geographic diversification by investing in international markets. A broader geographic spread can provide a hedge against regional economic downturns and currency fluctuations, potentially improving overall portfolio stability.

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.

Portfolio optimization indicates potential for improvement by adjusting asset allocation along the efficient frontier. Currently, the portfolio is positioned for high risk and return. To achieve a more conservative profile, consider increasing exposure to bonds or cash, reducing volatility. Conversely, a riskier stance could involve further leveraging equity positions. Optimizing the portfolio requires careful consideration of risk tolerance and financial goals, balancing growth potential with stability. Prioritize diversification to enhance resilience against market fluctuations before pursuing optimization strategies.

Dividends Info

  • Direxion Daily 20+ Year Treasury Bull 3X Shares 3.40%
  • ProShares UltraPro S&P500 0.70%
  • Weighted yield (per year) 1.38%

The portfolio's dividend yield is relatively low at 1.38%, with the Direxion Daily 20+ Year Treasury Bull 3X Shares contributing 3.4% and the ProShares UltraPro S&P500 offering 0.7%. While dividends can provide a steady income stream, the current yield may not be sufficient for income-focused investors. To enhance dividend income, consider reallocating some investments into higher-yielding assets. This strategy could offer a balance between growth and income, supporting both capital appreciation and cash flow needs.

Ongoing product costs Info

  • Direxion Daily 20+ Year Treasury Bull 3X Shares 1.04%
  • ProShares UltraPro S&P500 0.92%
  • Weighted costs total (per year) 0.95%

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