A highly speculative portfolio with significant tech exposure and limited geographic diversification

Report created on Dec 8, 2024

Risk profile Info

7/7
Speculative
Less risk More risk

Diversification profile Info

1/5
Single-Focused
Less diversification More diversification

Positions

The portfolio is evenly split between two ETFs: the ProShares UltraPro QQQ and the Vanguard S&P 500 ETF, each holding 50% of the total portfolio. This composition is heavily weighted towards equities, with a small allocation to cash and bonds. Such a structure implies a strong focus on growth, particularly in the technology sector, due to the nature of these ETFs. This can be beneficial for aggressive growth but also introduces significant volatility. Diversifying into other asset classes could potentially reduce risk and enhance stability, aligning with a more balanced investment strategy.

Growth Info

Historically, the portfolio has exhibited a Compound Annual Growth Rate (CAGR) of 33.29%, which is impressive but comes with a high maximum drawdown of -74.75%. This indicates the portfolio's potential for high returns during favorable market conditions but also highlights its vulnerability to significant losses during downturns. Such performance characteristics are typical of high-risk, high-reward investments. Investors should consider their ability to withstand such volatility and possibly adjust their allocations to mitigate potential losses in adverse market conditions.

Projection Info

Using Monte Carlo simulations, the portfolio's future performance was analyzed, projecting a wide range of potential outcomes. Monte Carlo simulation uses historical data to model the probability of various outcomes, which helps in understanding potential future risks and returns. The analysis shows a median projected return of 2,882.6% but also includes a 5th percentile outcome of 40.57%, indicating potential for both substantial gains and losses. While simulations provide valuable insights, they are based on past data and assumptions, which may not fully capture future market dynamics.

Asset classes Info

  • Stocks
    81%
  • Cash
    16%
  • Bonds
    2%
  • Other
    1%

The portfolio is predominantly invested in stocks, accounting for over 81% of the total allocation, with minimal exposure to cash and bonds. Such a heavy concentration in equities can lead to substantial growth but also increases exposure to market volatility. Diversifying across a broader range of asset classes, including bonds and alternative investments, could improve the risk-return profile by providing a buffer during market downturns. This approach aligns with a more diversified strategy, balancing potential returns with risk management.

Sectors Info

  • Technology
    42%
  • Telecommunications
    13%
  • Consumer Discretionary
    12%
  • Health Care
    8%
  • Financials
    7%
  • Consumer Staples
    6%
  • Industrials
    6%
  • Energy
    2%
  • Utilities
    2%
  • Basic Materials
    2%
  • Real Estate
    1%

The sector allocation is heavily skewed towards technology, which comprises over 42% of the portfolio. Other sectors like communication services and consumer cyclicals also have significant representation. While this concentration can capitalize on tech growth, it exposes the portfolio to sector-specific risks, such as regulatory changes or market saturation. Balancing the sector allocation by including more defensive sectors like healthcare or consumer defensive could help mitigate these risks and provide more stable returns over time.

Regions Info

  • North America
    98%
  • Europe Developed
    1%

The portfolio's geographic allocation is overwhelmingly focused on North America, with 98.485% of assets located there. This lack of geographic diversification can lead to increased risk due to regional economic fluctuations or policy changes. Expanding exposure to international markets, particularly in Europe or Asia, could enhance diversification and provide opportunities for growth in emerging economies. This approach can reduce reliance on a single region and potentially improve the portfolio's overall risk-return profile.

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 can be optimized using the Efficient Frontier concept, which seeks the best possible risk-return ratio by adjusting allocations between existing assets. While the portfolio is heavily weighted towards high-risk, high-reward assets, rebalancing towards a more efficient allocation could reduce risk without significantly sacrificing returns. This involves analyzing the risk-return trade-offs and potentially shifting some allocation to lower-risk assets to achieve a more balanced, efficient portfolio.

Dividends Info

  • ProShares UltraPro QQQ 1.10%
  • Vanguard S&P 500 ETF 1.20%
  • Weighted yield (per year) 1.15%

The portfolio's overall dividend yield is 1.15%, with both ETFs offering similar yields. While dividends can provide a steady income stream, the yield here is relatively modest, reflecting the growth-oriented nature of the investments. Investors seeking higher income might consider reallocating a portion of their assets to higher-yielding investments, such as dividend-focused ETFs or bonds. This can provide a balance between growth and income, catering to investors who value cash flow alongside capital appreciation.

Ongoing product costs Info

  • ProShares UltraPro QQQ 0.88%
  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.46%

The total expense ratio (TER) of the portfolio is 0.46%, driven primarily by the higher cost of the ProShares UltraPro QQQ ETF. While the Vanguard S&P 500 ETF offers a low-cost option, the overall costs can impact long-term returns, especially in a high-growth portfolio. Reducing costs by considering lower-fee alternatives or negotiating fees can enhance net returns over time. Investors should regularly review expense ratios and explore cost-efficient options to optimize their investment outcomes.

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