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

Report created on Aug 2, 2024

Risk profile Info

5/7
Growth
← Less risk More risk →

Diversification profile Info

1/5
Single-Focused
← Less diversification More diversification →

Positions

The portfolio is heavily weighted towards ETFs, with an emphasis on growth-oriented investments. The Vanguard S&P 500 ETF makes up 40% of the portfolio, offering broad exposure to large-cap U.S. stocks. The Invesco NASDAQ 100 ETF and Avantis U.S. Small Cap Value ETF add a tech and small-cap value tilt, respectively. The presence of leveraged ETFs like ProShares Ultra S&P500 and others introduces additional risk. The portfolio is largely focused on equities, with minimal allocation to bonds and cash, which may not provide adequate downside protection.

Growth Info

Historically, the portfolio has shown impressive performance, with a compound annual growth rate (CAGR) of 22.76%. However, this comes with a significant maximum drawdown of -34.65%, indicating high volatility. The portfolio's returns are concentrated, with 90% of gains occurring on just 21 days. This performance suggests potential for high returns but also highlights the risk of substantial losses. Investors should be prepared for periods of significant volatility and consider whether this aligns with their risk tolerance and financial goals.

Projection Info

A Monte Carlo simulation, which uses random sampling to predict future performance, was conducted with 1,000 iterations. The results show a median projected return of 1,853.58%, with an annualized return of 32.23%. However, there's a wide range of outcomes, with the 5th percentile at 61.46% and the 67th at 3,593.46%. While the majority of simulations show positive returns, this variability underscores the portfolio's high-risk nature. It's crucial to understand that past performance doesn't guarantee future results, and investors should consider their risk appetite.

Asset classes Info

  • Stocks
    96%
  • Cash
    3%
  • Other
    1%

The portfolio is predominantly composed of stocks, accounting for over 95% of the allocation. This heavy equity focus aligns with a growth strategy but also increases exposure to market volatility. There's a minimal allocation to cash and bonds, which may not provide sufficient diversification or stability during market downturns. Investors seeking to balance risk and return might consider incorporating more fixed-income assets or other asset classes to reduce overall volatility and provide a buffer during market corrections.

Sectors Info

  • Technology
    36%
  • Financials
    13%
  • Consumer Discretionary
    11%
  • Industrials
    9%
  • Health Care
    8%
  • Telecommunications
    8%
  • Consumer Staples
    5%
  • Energy
    4%
  • Basic Materials
    3%
  • Utilities
    2%
  • Real Estate
    2%

Sector allocation is concentrated, with technology making up over 36% of the portfolio. Other significant sectors include financial services, consumer cyclicals, and industrials. This concentration in a few sectors, particularly technology, can lead to increased volatility and risk, especially if these sectors underperform. A more balanced sector allocation could help mitigate risk by diversifying exposure across various economic cycles. Investors might want to reassess their sector weights to ensure they align with their long-term investment goals and risk tolerance.

Regions Info

  • North America
    99%
  • Europe Developed
    1%

Geographically, the portfolio is overwhelmingly focused on North America, with nearly 99% of assets allocated there. This lack of international diversification exposes the portfolio to specific regional risks and limits potential growth opportunities in other markets. While the U.S. market has historically performed well, global diversification could provide additional growth and risk mitigation. Investors should consider whether they are comfortable with this regional concentration or if they might benefit from a more globally diversified portfolio.

Redundant positions Info

  • ProShares Ultra Russell2000
    Avantis® U.S. Small Cap Value ETF
    High correlation
  • Vanguard S&P 500 ETF
    ProShares Ultra Dow30
    ProShares Ultra S&P500
    Invesco NASDAQ 100 ETF
    High correlation

The portfolio exhibits high correlations among several of its ETFs, particularly within groups like the ProShares Ultra Russell2000 and Avantis U.S. Small Cap Value ETF. Similarly, the Vanguard S&P 500 ETF, ProShares Ultra Dow30, and others show significant overlap. This high correlation suggests limited diversification benefits, as these assets tend to move in the same direction. Reducing overlap by selecting less correlated assets could enhance diversification, potentially improving the portfolio's risk-adjusted returns.

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 asset overlap to enhance diversification. The portfolio can be adjusted along the efficient frontier to either increase risk for potentially higher returns or decrease risk for more stability. Moving towards a more conservative allocation might involve increasing exposure to bonds or other less volatile assets, while a riskier stance could mean further concentrating on high-growth equities. However, it's essential to balance these adjustments with personal risk tolerance and long-term financial goals, ensuring the portfolio remains aligned with overall investment strategy.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.50%
  • ProShares Ultra Dow30 1.00%
  • Invesco NASDAQ 100 ETF 0.60%
  • ProShares Ultra S&P500 0.70%
  • ProShares Ultra Russell2000 0.80%
  • Vanguard S&P 500 ETF 1.20%
  • Weighted yield (per year) 0.97%

The portfolio's overall dividend yield is relatively low at 0.97%, reflecting its growth-oriented strategy. While dividends can provide a steady income stream, this portfolio prioritizes capital appreciation over income generation. Investors seeking higher income might consider incorporating higher-yielding assets or dividend-focused strategies. However, for those prioritizing growth, this yield level is consistent with expectations. Balancing growth and income needs will depend on individual financial goals and time horizons.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • ProShares Ultra Dow30 0.95%
  • Invesco NASDAQ 100 ETF 0.15%
  • ProShares Ultra S&P500 0.91%
  • ProShares Ultra Semiconductors 0.95%
  • ProShares Ultra Russell2000 0.95%
  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.31%

The portfolio's total expense ratio (TER) is 0.31%, which is relatively low and reflects cost-effective ETF selections. The Vanguard S&P 500 ETF, with an expense ratio of just 0.03%, contributes to this efficiency. However, leveraged ETFs like ProShares Ultra Dow30 and others have higher expense ratios, increasing overall costs. Keeping investment costs low is crucial for maximizing returns over the long term. Investors should regularly review their portfolio's cost structure to ensure it remains aligned with their financial objectives and risk tolerance.

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