A growth-focused portfolio with concentrated assets and high risk but promising returns

Report created on Jan 10, 2025

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 heavily concentrated with equal weightings in five assets, primarily stocks and ETFs, each holding 20%. This composition lacks diversity, as it focuses on a few large-cap U.S. equities and ETFs. While this approach can yield substantial returns, it also increases exposure to market volatility. Diversifying by adding more asset types or increasing the number of holdings could help mitigate risks. A well-diversified portfolio typically includes a mix of asset classes to spread risk and capture growth opportunities across different market conditions.

Growth Info

Historically, the portfolio has performed exceptionally well, with a Compound Annual Growth Rate (CAGR) of 22.76%. However, the maximum drawdown of -59.16% indicates significant volatility, which can be concerning during market downturns. Comparing this to a benchmark, such as the S&P 500, provides context for the risk-reward balance. While high growth is attractive, the potential for substantial losses should be considered. Investors might consider strategies to protect against downside risk, such as rebalancing or incorporating less volatile asset classes.

Projection Info

The Monte Carlo simulation projects a wide range of potential outcomes, with a median return of 1,258.41% over the investment horizon. This method uses historical data to simulate future performance but does not guarantee results. The simulations suggest a high likelihood of positive returns, with 985 out of 1,000 simulations showing gains. However, the variability in outcomes highlights the importance of being prepared for different scenarios. Considering this, investors may want to explore options for hedging against adverse market conditions while maintaining growth potential.

Asset classes Info

  • Stocks
    100%

The portfolio is nearly entirely composed of stocks, with 99.92% allocation, offering limited diversification across asset classes. This heavy reliance on equities can lead to higher volatility and risk, especially during market downturns. In contrast, a balanced portfolio typically includes bonds, commodities, or real estate to provide stability and income. Diversifying into other asset classes could reduce risk and enhance long-term performance by smoothing out returns. Investors should evaluate their risk tolerance and investment goals to determine the appropriate mix of assets.

Sectors Info

  • Consumer Discretionary
    28%
  • Technology
    27%
  • Financials
    24%
  • Telecommunications
    8%
  • Health Care
    5%
  • Industrials
    3%
  • Consumer Staples
    3%
  • Energy
    1%
  • Basic Materials
    1%
  • Utilities
    1%
  • Real Estate
    1%

The portfolio is heavily weighted towards consumer cyclicals, technology, and financial services, accounting for over 78% of the allocation. This concentration can lead to increased volatility, as these sectors are sensitive to economic cycles and interest rate changes. A more balanced sector allocation could mitigate risks associated with sector-specific downturns. Investors might consider adding exposure to underrepresented sectors like healthcare or utilities, which can offer stability and potential growth. Aligning sector weights with broader market benchmarks can help achieve better diversification.

Regions Info

  • North America
    99%

With 99.42% allocation in North America, the portfolio is highly concentrated geographically, limiting exposure to international markets. This focus can increase susceptibility to regional economic shifts or policy changes. Diversifying across regions can provide access to growth opportunities in emerging and developed markets, reducing reliance on a single economy. Investors should consider adding international equities or ETFs to broaden geographic exposure. This strategy can help capture global growth and hedge against regional risks, aligning with a more diversified investment approach.

Redundant positions Info

  • Vanguard S&P 500 ETF
    Vanguard Growth Index Fund ETF Shares
    Invesco QQQ Trust
    High correlation

The portfolio's assets show high correlation, particularly among the ETFs and common stocks. Highly correlated assets tend to move together, limiting diversification benefits and increasing portfolio risk during market downturns. To enhance diversification, consider incorporating assets with low or negative correlations, such as bonds or alternative investments. This can help reduce overall portfolio volatility and improve risk-adjusted returns. Investors should regularly assess asset correlations and make adjustments to maintain an optimal balance between risk and reward.

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 shows potential for optimization using the Efficient Frontier, which seeks the best possible risk-return ratio. However, the current high correlation among assets limits diversification benefits. Before optimizing, consider removing or reducing overlapping assets to improve diversification. Adjusting the allocation among existing assets could enhance the portfolio's efficiency. The Efficient Frontier focuses on achieving the maximum return for a given level of risk, helping investors make informed decisions about asset allocation. Regular reviews and adjustments can maintain optimal performance.

Dividends Info

  • Invesco QQQ Trust 0.60%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Growth Index Fund ETF Shares 0.50%
  • Weighted yield (per year) 0.46%

The portfolio's total dividend yield is modest at 0.46%, with individual yields ranging from 0.5% to 1.2%. While dividends provide a steady income stream, this portfolio prioritizes growth over income. Investors seeking higher income might consider adding dividend-focused stocks or ETFs. However, for a growth-oriented portfolio, reinvesting dividends can enhance compounding returns. Balancing growth and income depends on individual financial goals and risk tolerance. Investors should evaluate whether the current yield aligns with their investment objectives and consider adjustments if necessary.

Ongoing product costs Info

  • Invesco QQQ Trust 0.20%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Growth Index Fund ETF Shares 0.04%
  • Weighted costs total (per year) 0.05%

The portfolio's total expense ratio (TER) is impressively low at 0.05%, supporting better long-term performance by minimizing costs. Low costs are advantageous, as they allow more of the portfolio's returns to be retained by the investor. This aligns well with best practices for cost-effective investing. Investors should continue to monitor expenses and consider replacing high-fee assets with lower-cost alternatives if opportunities arise. Keeping costs low is crucial for maximizing net returns, especially in a growth-focused portfolio aiming for substantial capital appreciation.

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