High Risk Low Diversity Portfolio with Technology Overweight Suitable for Growth-Oriented Investors

Report created on Dec 2, 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 heavily weighted towards ETFs, with the Invesco QQQ Trust making up the largest portion. It also includes a significant position in NVIDIA Corporation, a common stock. This composition indicates a strong preference for growth-oriented assets, primarily in the technology sector. While ETFs provide some diversification, the overall portfolio is concentrated in a few holdings, leading to low diversity. This concentration can result in higher volatility, which may not be suitable for all investors. Consider diversifying further to reduce potential risks associated with market fluctuations.

Growth Info

Historically, the portfolio has shown impressive performance with a CAGR of 27.92%. However, this comes with a substantial max drawdown of -60.85%, indicating significant volatility. The days that make up 90% of returns are relatively few, suggesting that the portfolio's performance is driven by a small number of high-return days. This pattern can be risky, as missing these key days could drastically affect returns. To mitigate this risk, consider a more balanced asset allocation to ensure more consistent performance over time.

Projection Info

Using a Monte Carlo simulation with 1,000 iterations, the portfolio shows a wide range of potential outcomes. The 5th percentile projects a return of 491.69%, while the median is 3,577.06% and the 67th percentile is 5,615.97%. This suggests a high potential for growth, but also significant uncertainty. Monte Carlo simulations provide a probabilistic view of future performance, illustrating the potential variability of returns. To manage this uncertainty, consider adding more stable, income-generating assets to balance the high-growth components.

Asset classes Info

  • Stocks
    100%

The portfolio is overwhelmingly invested in stocks, with only a negligible amount in cash. This heavy stock allocation aligns with a growth-focused strategy but increases exposure to market volatility. Holding a diverse range of asset classes can help mitigate risk and provide stability during market downturns. Consider incorporating other asset classes, such as bonds or alternative investments, to enhance diversification and reduce overall portfolio risk.

Sectors Info

  • Technology
    53%
  • Consumer Discretionary
    10%
  • Telecommunications
    9%
  • Health Care
    7%
  • Financials
    7%
  • Industrials
    5%
  • Consumer Staples
    4%
  • Basic Materials
    2%
  • Energy
    1%
  • Utilities
    1%
  • Real Estate
    1%

Technology dominates the sector allocation, comprising over half of the portfolio. Other sectors like consumer cyclicals and communication services are also represented but to a much lesser extent. This concentration in technology can lead to higher returns during tech booms but also exposes the portfolio to sector-specific risks. A more balanced sector allocation could provide resilience against downturns in any single industry. Explore opportunities to diversify across various sectors to achieve a more stable performance.

Regions Info

  • North America
    99%
  • Europe Developed
    1%

Geographically, the portfolio is heavily concentrated in North America, with minimal exposure to other regions. This lack of geographic diversification can lead to increased risk if the North American markets face downturns. A globally diversified portfolio can help mitigate regional risks and capitalize on growth opportunities in emerging markets. Consider gradually increasing exposure to international markets to enhance geographic diversification and reduce reliance on a single region's economic performance.

Redundant positions Info

  • SPDR Dow Jones Industrial Average ETF Trust
    SPDR S&P 500 ETF Trust
    High correlation

The portfolio contains highly correlated assets, particularly between the SPDR Dow Jones Industrial Average ETF Trust and the SPDR S&P 500 ETF Trust. High correlation means these assets tend to move in the same direction, offering limited diversification benefits. Diversification is crucial for reducing risk, and highly correlated assets may not provide the desired risk mitigation. Consider replacing or reducing the allocation in one of these ETFs to introduce more uncorrelated assets and improve the portfolio's overall diversification.

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 overlapping assets like the highly correlated ETFs. This portfolio could benefit from diversification, which would enhance its position on the efficient frontier. To achieve a riskier portfolio, consider increasing allocations in high-growth stocks, while a more conservative approach would involve adding bonds or dividend-paying assets. This balance helps to align with risk appetite and investment goals. Prioritize diversification and correlation reduction to optimize for risk-adjusted returns.

Dividends Info

  • SPDR Dow Jones Industrial Average ETF Trust 1.40%
  • Invesco QQQ Trust 0.60%
  • SPDR S&P 500 ETF Trust 1.20%
  • Weighted yield (per year) 0.72%

The portfolio's dividend yield is relatively low at 0.72%, reflecting its growth-oriented nature. While growth stocks often reinvest earnings to fuel expansion, dividends can provide a steady income stream and reduce reliance on capital appreciation. A higher dividend yield could enhance the portfolio's income-generating potential and provide a buffer during market downturns. Consider incorporating dividend-paying stocks or ETFs to increase the portfolio's yield while maintaining growth potential.

Ongoing product costs Info

  • SPDR Dow Jones Industrial Average ETF Trust 0.16%
  • Invesco QQQ Trust 0.20%
  • SPDR S&P 500 ETF Trust 0.10%
  • Weighted costs total (per year) 0.12%

The portfolio's total expense ratio (TER) is 0.12%, which is quite reasonable. Lower costs mean more of your returns are retained, boosting overall performance. However, it's important to regularly review and compare fund expenses to ensure they remain competitive. Keeping costs low is a key component of long-term investment success. While the current costs are low, maintain vigilance on expense ratios and seek opportunities to further reduce costs without compromising the portfolio's strategy.

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