A speculative portfolio with heavy technology focus and high risk yet promising potential returns

Report created on Jan 14, 2025

Risk profile Info

7/7
Speculative
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

The portfolio is heavily weighted in technology stocks and ETFs, with a significant portion in individual equities like Allient Inc. This composition leans towards a high-risk, high-reward strategy, typical of speculative profiles. While ETFs provide some diversification, the concentration in tech and individual stocks increases volatility. Balancing this with more stable asset classes could reduce risk. Consider diversifying further by incorporating bonds or alternative assets to cushion against potential downturns, as the current allocation heavily skews towards equities, particularly in a single sector.

Growth Info

Historically, the portfolio has shown an impressive Compound Annual Growth Rate (CAGR) of 69.33%, although it has also experienced a significant maximum drawdown of -95.77%. This highlights the potential for substantial gains but also underscores the risk of significant losses. Comparing this to benchmarks, such volatility is expected in a speculative portfolio. Investors should be aware that past performance does not guarantee future results. To mitigate risks, consider strategies like stop-loss orders or diversifying into less volatile assets to protect against potential drawdowns.

Projection Info

Monte Carlo simulations, which use historical data to project future outcomes, show a wide range of potential results for this portfolio. While the median projection is a substantial 423.51% increase, there's also a notable risk of significant losses, as indicated by the 5th percentile projection of -96.57%. This reflects the speculative nature of the portfolio. Although simulations provide a helpful forecast, they cannot predict future market conditions. Diversifying the portfolio or adjusting asset allocations could help manage risk and align with your investment goals.

Asset classes Info

  • Stocks
    100%

The portfolio is almost entirely composed of stocks, with a negligible allocation to cash and other asset classes. This heavy stock concentration offers potential for high returns but also increases exposure to market volatility. Compare this to a balanced portfolio, which typically includes bonds or other asset classes to mitigate risk. Introducing more diverse asset classes could enhance stability, offering a buffer during market downturns. Consider reallocating a portion of the portfolio into bonds or real estate to achieve a more balanced risk-return profile.

Sectors Info

  • Technology
    54%
  • Health Care
    12%
  • Financials
    9%
  • Consumer Discretionary
    6%
  • Industrials
    5%
  • Consumer Staples
    5%
  • Energy
    4%
  • Telecommunications
    4%
  • Basic Materials
    1%
  • Utilities
    1%
  • Real Estate
    1%

With over half of the portfolio in the technology sector, this allocation exposes the portfolio to sector-specific risks, such as regulatory changes or tech market downturns. While tech investments can drive growth, they can also lead to heightened volatility, especially during interest rate hikes. Balancing the sector allocation with investments in more stable sectors like consumer staples or utilities could reduce risk. Consider adjusting sector weights to align with your risk tolerance and market outlook, ensuring a more robust and resilient portfolio.

Regions Info

  • North America
    97%
  • Europe Developed
    2%

The portfolio's geographic exposure is heavily skewed towards North America, accounting for over 97% of the allocation. While this aligns with the client's regional focus, it limits exposure to global growth opportunities and diversification benefits. Diversifying into international markets, particularly emerging markets, can provide access to different economic cycles and growth prospects. Consider increasing allocations to regions like Asia or Europe to enhance global diversification, potentially reducing risk and capturing broader market opportunities.

Redundant positions Info

  • iShares Core Dividend Growth ETF
    Schwab U.S. Dividend Equity ETF
    High correlation
  • Vanguard Total Stock Market Index Fund ETF Shares
    iShares Core S&P Total U.S. Stock Market ETF
    Schwab U.S. Broad Market ETF
    Vanguard S&P 500 ETF
    High correlation

The portfolio includes several highly correlated assets, particularly among ETFs like the iShares Core Dividend Growth ETF and Schwab U.S. Dividend Equity ETF. High correlation means these assets tend to move together, reducing diversification benefits. In market downturns, such correlation can amplify losses. To enhance diversification, consider replacing some of these assets with less correlated investments. This strategy can help manage risk by ensuring that not all assets are affected similarly by market changes, providing a more balanced 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 could potentially be optimized using the Efficient Frontier, which aims to maximize returns for a given level of risk. However, before proceeding, it's crucial to address the high correlation among certain assets, as this could limit diversification benefits. Optimization would focus on reallocating existing assets to achieve the best possible risk-return ratio. This process doesn't guarantee diversification but can enhance portfolio efficiency. Consider consulting a financial advisor to explore rebalancing strategies and ensure they align with your investment goals.

Dividends Info

  • Allient Inc. 0.40%
  • iShares Core Dividend Growth ETF 2.30%
  • iShares Core S&P Total U.S. Stock Market ETF 0.90%
  • Invesco QQQ Trust 0.60%
  • Schwab U.S. Broad Market ETF 0.90%
  • Schwab U.S. Dividend Equity ETF 3.60%
  • Vanguard S&P 500 ETF 1.30%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Vanguard Total International Stock Index Fund ETF Shares 3.40%
  • Weighted yield (per year) 1.25%

The portfolio's overall dividend yield is 1.25%, indicating a moderate contribution to returns from dividends. High dividend yields, like those from the Schwab U.S. Dividend Equity ETF, can provide a steady income stream, which is beneficial in volatile markets. However, the focus on growth stocks may limit dividend income. Balancing growth with income-focused investments could enhance stability and provide cash flow. Consider increasing exposure to high-dividend ETFs or stocks to boost income potential while maintaining growth opportunities.

Ongoing product costs Info

  • iShares Core Dividend Growth ETF 0.08%
  • iShares Core S&P Total U.S. Stock Market ETF 0.03%
  • Invesco QQQ Trust 0.20%
  • Schwab U.S. Broad Market ETF 0.03%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.03%

The portfolio benefits from impressively low costs, with a Total Expense Ratio (TER) of 0.03%. Low fees are advantageous as they enhance net returns over time, aligning with best practices for cost-efficient investing. However, it's essential to ensure that low-cost funds still meet your investment objectives. Regularly reviewing and comparing fund costs can help maintain this advantage. Consider evaluating whether any high-fee assets could be replaced with lower-cost alternatives without sacrificing performance or diversification.

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