High-Risk Growth Portfolio with Single-Focused Diversification and Strong Historical Performance

Report created on Dec 4, 2024

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

1/5
Single-Focused
Less diversification More diversification

Positions

The portfolio comprises four ETFs, with a significant focus on two leveraged funds: ProShares Ultra QQQ and ProShares Ultra S&P500, each making up 30% of the portfolio. This allocation suggests a high-risk, growth-oriented strategy, with a notable emphasis on technology and large-cap U.S. equities. The remaining funds include a diversified strategy ETF and a long-duration U.S. Treasury ETF, which adds some fixed-income exposure. While the portfolio's composition aligns with a growth profile, the heavy reliance on leveraged funds can lead to higher volatility, which may not be suitable for conservative investors.

Growth Info

Historically, the portfolio has demonstrated strong performance, with a compound annual growth rate (CAGR) of 16.38%. However, this comes with a significant maximum drawdown of -38.88%, indicating substantial volatility. The portfolio's returns are concentrated in a few high-performing days, which is typical for portfolios with high-risk, growth-oriented assets. This performance pattern suggests that while the potential for high returns exists, the portfolio is also susceptible to sharp declines, which could be challenging during market downturns.

Projection Info

Using a Monte Carlo simulation with 1,000 iterations, the portfolio shows a wide range of potential outcomes. With a hypothetical initial investment, the median projection indicates a 204.62% increase, while the 5th percentile suggests a significant potential loss of -56.46%. This simulation highlights the inherent uncertainty and risk associated with the portfolio's current allocation. While the potential for high returns is evident, the wide variance underscores the importance of risk management and diversification to mitigate potential downturns.

Asset classes Info

  • Stocks
    50%
  • Cash
    36%
  • Bonds
    12%
  • Other
    1%

The portfolio is primarily composed of stocks (50.45%) and cash (35.93%), with bonds making up 12.39% and a small allocation to other assets. This asset class distribution reflects a growth-oriented strategy, with a substantial allocation to equities. However, the high percentage of cash may indicate a conservative stance or a lack of investment opportunities. Balancing the asset classes by increasing bond exposure could help reduce volatility and provide a buffer during market fluctuations, aligning better with a more balanced risk profile.

Sectors Info

  • Technology
    25%
  • Telecommunications
    8%
  • Consumer Discretionary
    7%
  • Health Care
    5%
  • Financials
    4%
  • Consumer Staples
    3%
  • Industrials
    3%
  • Energy
    1%
  • Utilities
    1%
  • Basic Materials
    1%
  • Real Estate
    1%

Sector allocation reveals a strong emphasis on technology (25.29%), followed by communication services and consumer cyclicals. This concentration in growth sectors aligns with a high-risk, high-reward strategy. However, it exposes the portfolio to sector-specific risks, particularly in technology, which can be volatile. Diversifying across a broader range of sectors, such as healthcare or utilities, could help mitigate these risks and provide more stability. This adjustment could enhance the portfolio's resilience to market shifts affecting specific industries.

Regions Info

  • North America
    59%
  • Europe Developed
    1%

Geographically, the portfolio is heavily skewed towards North America, with 59.10% of assets allocated there. This concentration suggests a strong reliance on the U.S. market's performance. While the U.S. has historically been a robust market, diversifying into other regions could reduce geographic risk and capture growth opportunities in emerging markets. Expanding geographic exposure can also hedge against potential downturns in the U.S. economy, providing a more balanced global investment approach.

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 allocation suggests potential for optimization along the efficient frontier, allowing for either higher returns or lower risk. By adjusting asset class weights, such as increasing bonds for a more conservative approach or adding equities for higher growth, the portfolio can be tailored to better align with specific risk-return preferences. Before optimizing, focus on enhancing diversification and reducing costs, ensuring a solid foundation for any adjustments. This approach will help achieve a more balanced and efficient portfolio over time.

Dividends Info

  • ProShares Ultra QQQ 0.30%
  • ProShares Ultra S&P500 0.70%
  • PIMCO 25+ Year Zero Coupon U.S. Treasury Index Exchange-Traded Fund 4.00%
  • Weighted yield (per year) 1.10%

The portfolio's dividend yield stands at 1.1%, with the PIMCO U.S. Treasury ETF contributing the most at 4.0%. This yield is relatively low, reflecting the growth-focused nature of the portfolio, which prioritizes capital appreciation over income generation. Investors seeking regular income may find this yield insufficient. To increase dividend income, consider reallocating some assets towards dividend-paying equities or fixed-income securities. This adjustment can provide a more balanced return profile, combining growth potential with income generation.

Ongoing product costs Info

  • KFA Mount Lucas Index Strategy ETF 0.90%
  • ProShares Ultra QQQ 0.95%
  • ProShares Ultra S&P500 0.91%
  • PIMCO 25+ Year Zero Coupon U.S. Treasury Index Exchange-Traded Fund 0.15%
  • Weighted costs total (per year) 0.77%

The total expense ratio (TER) for the portfolio is 0.77%, with the KFA Mount Lucas Index Strategy ETF having the highest individual cost at 0.9%. While the overall cost is moderate, the high costs of some ETFs could impact net returns over time. Reducing costs by selecting lower-cost alternatives or negotiating fees can improve portfolio efficiency. Monitoring and managing investment costs is crucial for maximizing returns, especially in a high-risk portfolio where every basis point counts towards overall performance.

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