High Risk High Reward Aggressive Portfolio with Strong Tech Focus and Limited Geographic and Sector Diversification

Report created on Nov 26, 2024

Risk profile Info

6/7
Aggressive
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

The portfolio is composed primarily of stocks, with a significant allocation in ETFs, particularly the Schwab U.S. Large-Cap Growth ETF. This ETF accounts for nearly 29% of the portfolio, indicating a strong focus on large-cap growth stocks. The portfolio also includes a mix of individual stocks like NVIDIA and Verizon, which adds a layer of concentration risk. While the portfolio is moderately diversified, it's heavily weighted towards specific stocks, which can lead to volatility. To enhance diversification, consider adding more varied asset classes and reducing the concentration in a few large holdings.

Growth Info

Historically, the portfolio has exhibited impressive performance with a Compound Annual Growth Rate (CAGR) of 33.94%. However, this comes with significant volatility, as evidenced by a maximum drawdown of over 52%. Such drawdowns indicate the potential for substantial losses during market downturns. The portfolio's returns are concentrated in a few days, suggesting it relies on high-risk, high-reward opportunities. To reduce volatility, consider balancing the portfolio with less volatile assets, which could help in smoothing out returns over time.

Projection Info

Using a Monte Carlo simulation, which involves running multiple scenarios to predict future performance, the portfolio's projected outcomes vary widely. With a hypothetical initial investment, the simulation shows a wide range of potential outcomes, from significant losses to substantial gains. The median projection indicates a potential loss, highlighting the portfolio's aggressive nature. While there's potential for high returns, the risk of loss is also high. To mitigate this risk, consider diversifying into more stable investments, which can help buffer against potential downturns.

Asset classes Info

  • Stocks
    100%

The portfolio is overwhelmingly concentrated in stocks, accounting for nearly 100% of the asset allocation. This heavy reliance on equities can result in higher returns but also increases exposure to market volatility. With minimal allocation to other asset classes, the portfolio lacks the stability that bonds or other fixed-income instruments can provide. To improve risk-adjusted returns, consider introducing a mix of asset classes, such as bonds or real estate, which can offer diversification benefits and reduce overall portfolio risk.

Sectors Info

  • Technology
    49%
  • Consumer Discretionary
    17%
  • Telecommunications
    11%
  • Consumer Staples
    10%
  • Financials
    4%
  • Health Care
    4%
  • Industrials
    2%
  • Basic Materials
    1%
  • Energy
    1%

The sector allocation is heavily skewed towards technology, which makes up almost half of the portfolio. While this can lead to substantial growth during tech booms, it also exposes the portfolio to sector-specific risks. The remaining sectors, like consumer cyclicals and communication services, have smaller allocations, offering limited diversification. To achieve a more balanced sector exposure, consider reallocating some investments to underrepresented sectors. This can help mitigate risks associated with sector downturns and improve the portfolio's resilience to market changes.

Regions Info

  • North America
    92%
  • Europe Developed
    4%
  • Asia Emerging
    1%
  • Japan
    1%
  • Asia Developed
    1%

Geographically, the portfolio is highly concentrated in North America, with over 91% of assets allocated there. This limited exposure to international markets can result in missed opportunities for growth in other regions. While the portfolio does have small allocations in Europe and Asia, the lack of geographic diversification increases vulnerability to regional economic downturns. To enhance global exposure, consider increasing allocations to emerging markets and other developed regions, which can provide growth opportunities and reduce reliance on the North American market.

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 optimization chart suggests focusing on diversification before attempting to optimize along the efficient frontier. Currently, the portfolio is heavily concentrated in specific sectors and geographies, limiting its ability to achieve an optimal risk-return balance. To move towards a riskier or more conservative portfolio, consider adjusting the asset allocation by incorporating a broader mix of asset classes and sectors. This can help in achieving a more balanced portfolio that aligns with the investor's risk tolerance and financial goals.

Dividends Info

  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • Vanguard Total International Stock Index Fund ETF Shares 3.00%
  • Verizon Communications Inc 6.00%
  • Weighted yield (per year) 0.78%

The portfolio's dividend yield is relatively low at 0.78%, with Verizon Communications providing the highest yield at 6%. This suggests a focus on growth stocks rather than income-generating investments. While growth stocks can offer substantial capital appreciation, they may not provide a steady income stream. To enhance income generation, consider incorporating more dividend-paying stocks or funds. This can provide a more balanced approach, offering both growth potential and regular income, which can be particularly beneficial during periods of market volatility.

Ongoing product costs Info

  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.02%

The portfolio's costs are minimal, with the Schwab U.S. Large-Cap Growth ETF and Vanguard Total International Stock Index Fund ETF Shares having low expense ratios. This low-cost structure is beneficial as it maximizes net returns. Keeping investment costs low is a crucial component of successful investing, as high costs can erode returns over time. While the current cost structure is efficient, it's essential to continue monitoring expenses and seek opportunities to further reduce costs. This can be achieved by considering low-cost index funds or ETFs as part of the investment strategy.

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