Aggressive Portfolio with High Risk and Low Diversification Dominated by Technology and Communication Stocks

Risk profile

  • Secure
    Speculative

The risk profile, derived from past market volatility, reflects the level of risk the portfolio is exposed to. This assessment helps align your investments with your financial goals and comfort with market fluctuations.

Diversification profile

  • Focused
    Diversified

The diversification assessment evaluates the spread of investments across asset classes, regions, and sectors. This ensures a balanced mix, reducing risk and maximizing returns by not concentrating in any single area.

What type of investor this portfolio is suitable for

Aggressive Investors

This portfolio suits an aggressive investor who seeks high growth potential and accepts significant risk. They likely have a long investment horizon and can tolerate market volatility. Their primary goal is capital appreciation rather than generating income. This investor is comfortable with a concentrated portfolio and understands that the lack of diversification can lead to large swings in value. They are willing to endure potential downturns for the chance of achieving substantial returns over time.

Positions

  • Alphabet Inc Class A
    GOOGL - US02079K3059
    40.00%
  • Block Inc
    SQ - US8522341036
    40.00%
  • Vanguard S&P 500 ETF
    VOO - US9229083632
    20.00%

The portfolio is heavily concentrated, with 80% invested in two individual stocks: Alphabet Inc Class A and Block Inc. The remaining 20% is in the Vanguard S&P 500 ETF. This creates a high-risk profile due to the lack of diversification. A concentrated portfolio can lead to significant gains if these companies perform well but also exposes the investor to substantial losses if they underperform. To improve diversification, consider including additional asset classes or sectors to spread risk more evenly across different investments.

Growth Info

Historically, the portfolio has delivered an impressive CAGR of 26.63%. However, this comes with a high max drawdown of -72.14%, indicating significant volatility. A high CAGR can be enticing, but the potential for large drawdowns means the portfolio could suffer during market downturns. Understanding this historical performance helps manage expectations and assess whether the current risk level aligns with the investor's goals. To mitigate potential risks, the portfolio could benefit from a more balanced allocation that reduces volatility while maintaining growth potential.

Projection Info

A Monte Carlo simulation was conducted using 1,000 simulations to predict future outcomes. The median result suggests a potential growth of 1,138.55%, with 959 simulations showing positive returns. Monte Carlo simulations provide a range of possible outcomes based on historical data, helping investors understand potential risks and rewards. While the median projection is promising, the wide range of outcomes highlights the inherent uncertainty in investing. Diversifying the portfolio could help stabilize returns and reduce the impact of unfavorable market conditions on the overall performance.

Asset classes

  • Stocks
    100%
  • Cash
    0%

The portfolio is almost entirely composed of stocks, with a negligible cash component. This high allocation to stocks is typical for an aggressive investment strategy, which seeks higher returns at the expense of increased risk. While stocks offer significant growth potential, they also expose the portfolio to market volatility. A broader asset class diversification, such as including bonds or other fixed-income securities, could help balance risk and reward, providing a more stable investment experience over time.

Sectors

  • Technology
    47%
  • Telecommunications
    42%
  • Financials
    3%
  • Health Care
    2%
  • Consumer Discretionary
    2%
  • Industrials
    2%
  • Consumer Staples
    1%
  • Energy
    1%
  • Utilities
    1%
  • Real Estate
    0%
  • Basic Materials
    0%

The portfolio's sector allocation is dominated by Technology and Communication Services, making up over 88% of the total. This heavy concentration increases exposure to sector-specific risks, such as regulatory changes or technological disruptions. While these sectors have been strong performers, relying too heavily on them can lead to significant losses if they face downturns. To reduce sector-specific risk, consider diversifying into other sectors that may offer stability and growth potential, creating a more resilient portfolio.

Regions

  • North America
    100%
  • Europe Developed
    0%
  • Asia Developed
    0%

Geographically, the portfolio is overwhelmingly centered in North America, with minimal exposure to other regions. This concentration can limit the portfolio's ability to benefit from growth opportunities in emerging markets or other developed regions. Geographic diversification can reduce risk by spreading investments across different economic environments and market conditions. Expanding the portfolio's geographic reach may enhance its resilience against regional economic downturns and provide access to a broader range of growth opportunities.

Dividends

  • Alphabet Inc Class A 0.20%
  • Vanguard S&P 500 ETF 1.20%
  • Weighted yield (per year) 0.32%

The portfolio's dividend yield is relatively low at 0.32%, with Alphabet Inc Class A contributing a modest 0.2% and the Vanguard S&P 500 ETF offering 1.2%. Low dividend yields are common in growth-focused portfolios, where the emphasis is on capital appreciation rather than income generation. While dividends can provide a steady income stream, they are less critical for investors seeking long-term growth. However, incorporating dividend-paying stocks or funds could offer a balance of income and growth, providing stability during market fluctuations.

Ongoing product costs

  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.01%

The portfolio benefits from low costs, with the Vanguard S&P 500 ETF having an expense ratio of 0.03% and a total TER of 0.01%. Low costs are advantageous as they help maximize net returns, allowing more of the investment's growth to benefit the investor. Keeping costs low is a key principle in successful investing, as high fees can erode returns over time. Maintaining a focus on cost-efficient investments will continue to support the portfolio's performance, particularly in a low-cost ETF like the Vanguard S&P 500.

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.

The portfolio's optimization chart suggests potential for improvement by enhancing diversification. Moving along the efficient frontier can help achieve a more balanced risk-return profile. To reduce risk, consider incorporating more conservative assets like bonds. For those seeking higher returns, maintaining the current aggressive allocation may suffice, but with added diversification. Before optimizing, focus on addressing high correlation and sector concentration, which can impact performance. Balancing these elements can lead to a more robust portfolio suited to the investor's risk tolerance.

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