Growth-Oriented Portfolio with Low Diversification and High Risk Score

Report created on Nov 24, 2024

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 invested in ETFs and stocks, with a significant emphasis on technology and financial services sectors. The largest position is the Invesco NASDAQ 100 ETF, making up 29% of the portfolio, followed by the SPDR® Portfolio S&P 500 ETF at 25%. The allocation to individual stocks like NVIDIA, Tesla, SoFi Technologies, and Robinhood Markets makes up a substantial portion of the portfolio. The overall composition suggests a focus on growth, with a low diversification score indicating a need for broader asset allocation to manage risk effectively.

Growth Info

Historically, the portfolio has performed impressively, with a compound annual growth rate (CAGR) of 24.11%. However, it has also experienced a maximum drawdown of -41.73%, highlighting its volatility. The performance is driven by a small number of days accounting for the majority of returns, indicating reliance on specific market conditions. This historical data suggests that while the portfolio has the potential for high returns, it is also susceptible to significant downturns, requiring a careful evaluation of risk tolerance and potential adjustments to reduce volatility.

Projection Info

Using a Monte Carlo simulation with 1,000 iterations, the portfolio's future performance has been projected. This simulation considers different market scenarios to estimate potential outcomes. The results show a wide range of possibilities, with a 5th percentile outcome of -63.58% and a 67th percentile outcome of 2,070.05%. The median projection is an 821.55% increase, indicating potential for growth but also substantial risk. While the annualized return is 37.59%, the variability suggests that the portfolio could benefit from diversification to stabilize returns and manage potential downturns.

Asset classes Info

  • Stocks
    100%

The portfolio is almost entirely composed of stocks, with a negligible allocation to cash. This heavy reliance on equities suggests a focus on capital appreciation rather than income generation or capital preservation. Such an asset class concentration can lead to higher volatility, especially during market downturns. Diversifying into other asset classes, such as bonds or real estate, could help reduce risk and provide a more balanced investment approach. This would help cushion the portfolio against market fluctuations and provide more stable returns over time.

Sectors Info

  • Technology
    37%
  • Financials
    20%
  • Consumer Discretionary
    17%
  • Telecommunications
    7%
  • Industrials
    5%
  • Health Care
    5%
  • Consumer Staples
    4%
  • Energy
    3%
  • Basic Materials
    2%
  • Utilities
    1%
  • Real Estate
    1%

Sector allocation within the portfolio is heavily skewed towards technology, making up nearly 37% of the total. Financial services and consumer cyclicals also have significant weightings. This concentration increases exposure to sector-specific risks, particularly in technology, which can be volatile. A more balanced sector allocation could help mitigate these risks. By diversifying across a wider range of sectors, the portfolio could achieve more stable performance, reducing the impact of downturns in any single sector and enhancing long-term growth potential.

Regions Info

  • North America
    99%
  • Europe Developed
    1%

Geographically, the portfolio is overwhelmingly focused on North America, with 98.9% of assets allocated there. This lack of geographic diversification exposes the portfolio to regional economic and political risks. While North American markets have been strong performers, expanding exposure to other regions could provide additional growth opportunities and reduce risk. By incorporating investments from Europe, Asia, or emerging markets, the portfolio could benefit from global economic trends and reduce its reliance on the performance of a single region.

Redundant positions Info

  • Invesco NASDAQ 100 ETF
    SPDR® Portfolio S&P 500 ETF
    High correlation

The portfolio contains highly correlated assets, particularly between the Invesco NASDAQ 100 ETF and the SPDR® Portfolio S&P 500 ETF. High correlation among assets can diminish diversification benefits, leading to increased risk during market downturns. Reducing the overlap of such correlated investments could enhance diversification and improve risk-adjusted returns. By selecting assets with lower correlations, the portfolio could achieve a more stable performance, minimizing the impact of market volatility and enhancing the potential for long-term growth.

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.

Before optimizing the portfolio, addressing the issue of highly correlated assets is crucial. Removing or reducing overlapping investments can enhance diversification and improve risk-adjusted returns. Once this is achieved, moving along the efficient frontier can help adjust the portfolio's risk profile. To achieve a riskier portfolio, focus on higher-growth assets, while a more conservative approach would involve increasing exposure to bonds or other low-risk investments. This strategy allows for a tailored approach to risk management, aligning the portfolio with specific financial goals and risk tolerance.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.50%
  • Invesco NASDAQ 100 ETF 0.60%
  • SPDR® Portfolio S&P 500 ETF 1.20%
  • Weighted yield (per year) 0.65%

The portfolio's dividend yield is relatively low at 0.65%, reflecting its growth-oriented strategy. The emphasis on capital appreciation through stocks and ETFs with lower dividend payouts aligns with the portfolio's focus on growth. However, incorporating higher-yielding investments could provide a steady income stream and reduce reliance on capital gains. This could be particularly beneficial during market downturns when growth stocks may underperform. Balancing growth and income could enhance the portfolio's resilience and provide a more consistent return profile.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Invesco NASDAQ 100 ETF 0.15%
  • SPDR® Portfolio S&P 500 ETF 0.02%
  • Weighted costs total (per year) 0.08%

The portfolio's total expense ratio (TER) is 0.08%, indicating a cost-effective approach to investing. The low costs are primarily due to the use of ETFs, which typically have lower fees than actively managed funds. Keeping investment costs low is crucial for maximizing returns over the long term. However, it's important to ensure that low costs do not come at the expense of diversification or risk management. Continuing to focus on cost-effective investments while enhancing diversification could improve the portfolio's overall performance and sustainability.

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