High Risk Low Diversity Portfolio with Strong Historical Performance and Potential Growth

Report created on Nov 24, 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 composed of two ETFs, with a dominant 90% allocation to the Vanguard S&P 500 ETF and 10% to the ARK Autonomous Technology & Robotics ETF. This composition reflects a focused investment strategy with a strong emphasis on large-cap U.S. equities and a smaller allocation to innovative technology sectors. While this setup offers exposure to potentially high-growth areas, it lacks diversification, which could increase vulnerability to market volatility. A more balanced approach, incorporating a wider range of sectors or asset classes, could help mitigate risk and enhance stability.

Growth Info

Historically, the portfolio has performed impressively with a CAGR of 14.37%, although it experienced a significant maximum drawdown of -33.94%. This indicates that while the portfolio has delivered substantial returns, it has also been exposed to considerable volatility. The concentration in the S&P 500 has contributed to strong performance, but the lack of diversification may have amplified the impact of market downturns. To maintain robust returns while minimizing potential losses, it may be beneficial to explore additional investments that can provide a cushion during market fluctuations.

Projection Info

Using a Monte Carlo simulation with 1,000 iterations, the portfolio's future performance was analyzed, assuming a hypothetical initial investment. The results show a wide range of possible outcomes, with a 5th percentile return of 54.54% and a 50th percentile return of 557.03%. The annualized return across all simulations is 16.89%, indicating potential for growth. However, the variability in outcomes highlights the importance of diversification to manage risk. By incorporating more diverse assets, the portfolio could achieve a more balanced risk-return profile, increasing the likelihood of achieving financial goals.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily weighted towards stocks, with 99.92% in equities and negligible allocations to cash and bonds. This concentration in equities aligns with a growth-focused strategy but also increases exposure to market volatility. A more diversified asset allocation, including bonds or other asset classes, could help stabilize the portfolio and provide income during downturns. By broadening the range of asset classes, the portfolio can better withstand market fluctuations and maintain steady growth over time.

Sectors Info

  • Technology
    33%
  • Financials
    12%
  • Consumer Discretionary
    11%
  • Industrials
    10%
  • Health Care
    10%
  • Telecommunications
    9%
  • Consumer Staples
    5%
  • Energy
    3%
  • Utilities
    3%
  • Real Estate
    2%
  • Basic Materials
    2%

Sector allocation is primarily concentrated in technology, which comprises 32.92% of the portfolio, followed by financial services and consumer cyclicals. While the focus on technology offers exposure to innovative and potentially high-growth areas, it also increases vulnerability to sector-specific risks. A more balanced sector allocation could help mitigate these risks and enhance the portfolio's resilience. By diversifying across various sectors, the portfolio can better capture opportunities in different market environments and achieve more consistent returns.

Regions Info

  • North America
    99%
  • Europe Developed
    1%

Geographically, the portfolio is overwhelmingly concentrated in North America, with 98.64% of assets allocated there. This heavy focus on a single region limits exposure to international markets and the potential benefits of global diversification. By expanding investments to include more diverse geographic regions, the portfolio could capture growth opportunities in emerging and developed markets outside North America. This approach can enhance diversification, reduce regional risk, and contribute to a more balanced and resilient portfolio.

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 structure offers potential for optimization by moving along the efficient frontier to balance risk and return. To achieve a riskier portfolio, increasing allocation to high-growth sectors or equities may be considered. Conversely, for a more conservative approach, incorporating bonds or income-generating assets can help reduce volatility. Before making changes, evaluating the portfolio's alignment with financial goals and risk tolerance is essential. By optimizing the portfolio, investors can enhance returns while managing risk effectively, ensuring long-term financial success.

Dividends Info

  • Vanguard S&P 500 ETF 1.20%
  • Weighted yield (per year) 1.08%

The portfolio's dividend yield stands at 1.08%, primarily driven by the Vanguard S&P 500 ETF's yield of 1.2%. While dividends provide a source of income, the yield is relatively modest given the portfolio's composition. To enhance income generation, consider exploring investments with higher dividend yields or incorporating dividend-focused strategies. By increasing the portfolio's dividend yield, investors can benefit from a steady income stream, which can be reinvested to compound returns or used to meet financial needs.

Ongoing product costs Info

  • ARK Autonomous Technology & Robotics ETF 0.75%
  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.10%

The portfolio's total expense ratio (TER) is 0.1%, with the Vanguard S&P 500 ETF contributing a low 0.03% and the ARK Autonomous Technology & Robotics ETF at a higher 0.75%. While overall costs are relatively low, the ARK ETF's higher expense ratio could impact net returns over time. Keeping investment costs low is crucial for maximizing returns, so consider monitoring expense ratios and exploring cost-effective investment options. By minimizing fees, investors can enhance their portfolio's long-term performance and retain more of their returns.

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