High-risk high-reward portfolio with a strong focus on U.S. technology and growth stocks
Report created on Jan 12, 2025Risk profile
6/7
Diversification profile
1/5
Positions
-
SC Schwab U.S. Large-Cap Growth ETF
SCHG - US8085243009 70.00% -
AV Avantis® U.S. Small Cap Value ETF
AVUV - US0250728773 20.00% -
TQ ProShares UltraPro QQQ
TQQQ - US74347X8314 10.00%
This portfolio primarily consists of ETFs with a dominant allocation to the Schwab U.S. Large-Cap Growth ETF at 70%, followed by the Avantis U.S. Small Cap Value ETF at 20%, and ProShares UltraPro QQQ at 10%. Such a composition leans heavily towards large-cap growth stocks, which is common in aggressive portfolios. However, it lacks diversification across asset classes and regions, focusing mainly on U.S. equities. For better risk management, consider adding more diversified asset types like bonds or international stocks to balance potential volatility.
Growth
Historically, the portfolio has delivered impressive returns with a CAGR of 24.91%. This indicates strong growth performance, likely driven by the tech-heavy allocation. However, the max drawdown of -42.47% highlights significant volatility, which is typical for aggressive portfolios. While past performance can inform expectations, it doesn't guarantee future results. To mitigate potential downturns, consider diversifying the portfolio further to balance growth with stability.
Projection
Monte Carlo simulations, which use historical data to forecast potential outcomes, suggest varied future returns. With a 50th percentile projection of 2,263.54% and an annualized return of 42.89%, the portfolio could perform well. However, the 5th percentile shows a potential loss of -7.76%, underscoring the risk. Remember, these projections are based on past data and assumptions, so actual future performance may differ. Diversifying the portfolio could help manage risks and stabilize returns.
Asset classes
- Stocks 96%
- Cash 4%
The portfolio is heavily weighted in stocks at 96.11%, with minimal allocations to cash, bonds, and other assets. This skew towards equities aligns with an aggressive investment strategy but limits diversification. Diversification across asset classes can reduce risk and enhance stability. Consider incorporating bonds or other asset types to create a more balanced portfolio, better equipped to weather market fluctuations and provide steady returns.
Sectors
- Technology 40%
- Consumer Discretionary 14%
- Financials 11%
- Telecommunications 11%
- Health Care 8%
- Industrials 6%
- Energy 3%
- Consumer Staples 3%
- Basic Materials 3%
- Utilities 1%
- Real Estate 1%
With a 39.99% allocation to technology, the portfolio is significantly concentrated in this sector. While tech stocks have driven recent growth, they also introduce volatility, especially during economic shifts like interest rate changes. Other sectors like consumer cyclicals and financial services have smaller allocations. To reduce risk, consider diversifying into underrepresented sectors, which can provide more stability and capture growth across different economic cycles.
Regions
- North America 99%
The portfolio has a strong geographic concentration in North America at 99.25%, with minimal exposure to other regions. This focus on the U.S. market limits global diversification and could increase vulnerability to regional economic downturns. Expanding geographic exposure to include more developed and emerging markets can enhance diversification, potentially offering new growth opportunities and reducing reliance on the U.S. economy.
Redundant positions
-
High correlationSchwab U.S. Large-Cap Growth ETFProShares UltraPro QQQ
The Schwab U.S. Large-Cap Growth ETF and ProShares UltraPro QQQ are highly correlated, meaning they tend to move together. This correlation reduces diversification benefits, as both ETFs are likely to perform similarly in market conditions. To enhance diversification, consider replacing one of these ETFs with an asset that has a lower correlation, providing a more balanced risk profile and reducing the impact of market swings.
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's current setup could be optimized using the Efficient Frontier concept, which balances risk and return. However, the presence of highly correlated assets like the Schwab U.S. Large-Cap Growth ETF and ProShares UltraPro QQQ limits diversification benefits. By adjusting allocations and reducing overlap, you can potentially achieve a better risk-return ratio. This optimization focuses on the existing assets and does not imply adding new ones.
Dividends
- Avantis® U.S. Small Cap Value ETF 1.60%
- Schwab U.S. Large-Cap Growth ETF 0.40%
- ProShares UltraPro QQQ 1.30%
- Weighted yield (per year) 0.73%
The portfolio's overall dividend yield is 0.73%, with contributions from each ETF. While dividends are not the primary focus for growth-oriented portfolios, they can provide a steady income stream and help cushion against market volatility. If income is a concern, consider allocating more to dividend-focused investments, which could enhance the portfolio's yield and provide more consistent returns over time.
Ongoing product costs
- Avantis® U.S. Small Cap Value ETF 0.25%
- Schwab U.S. Large-Cap Growth ETF 0.04%
- ProShares UltraPro QQQ 0.88%
- Weighted costs total (per year) 0.17%
The portfolio's total expense ratio (TER) is 0.17%, which is quite low and beneficial for long-term performance. Lower costs mean more of your returns stay in your pocket, compounding over time. The ProShares UltraPro QQQ has a higher fee at 0.88%, which could be reduced by considering lower-cost alternatives. Continuously monitoring and optimizing for costs can enhance net returns and improve the overall efficiency of the portfolio.
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