Growth-oriented portfolio heavily weighted in tech with low diversification and moderate risk

Report created on Aug 20, 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 predominantly invested in two ETFs, the Vanguard S&P 500 ETF and the Invesco QQQ Trust, comprising 97% of the total, with a minor allocation in Lucid Group Inc and ChargePoint Holdings Inc stocks. This composition indicates a strong focus on the US stock market, particularly within the technology sector, given QQQ's tech-heavy nature. The allocation reflects a growth-oriented strategy but lacks diversification across asset classes and sectors.

Growth Info

Historically, this portfolio has demonstrated a Compound Annual Growth Rate (CAGR) of 16.17%, with a maximum drawdown of -28.21%. These figures suggest that while the portfolio has experienced significant growth, it has also faced substantial volatility, as indicated by the steep maximum drawdown. The days contributing to 90% of returns being concentrated in just 23.0 days highlight the portfolio's reliance on short-term gains, which could be risky for investors seeking steady long-term growth.

Projection Info

The Monte Carlo simulation, which projects future performance based on historical data, shows a wide range of outcomes with a significant portion of simulations resulting in negative returns. This suggests potential future volatility and underscores the importance of diversification to mitigate risk. While the average annualized return from all simulations is 1.62%, the wide variance in potential outcomes highlights the risk inherent in this portfolio's current composition.

Asset classes Info

  • Stocks
    100%

The portfolio's allocation is entirely in stocks, with no presence in other asset classes such as bonds or real estate. This lack of diversification across asset classes can increase volatility and risk, especially during market downturns when non-correlated assets might otherwise offer a buffer. Diversifying across different asset classes can help smooth out returns over time and reduce overall portfolio risk.

Sectors Info

  • Technology
    34%
  • Consumer Discretionary
    14%
  • Financials
    12%
  • Telecommunications
    10%
  • Health Care
    9%
  • Industrials
    7%
  • Consumer Staples
    6%
  • Energy
    3%
  • Utilities
    2%
  • Real Estate
    2%
  • Basic Materials
    2%

Sector allocation is heavily weighted towards technology, followed by consumer cyclicals and financial services. This concentration in tech and growth-oriented sectors has likely contributed to the portfolio's high historical performance but also increases susceptibility to sector-specific downturns. Broadening sector exposure could help mitigate this risk and provide more balanced growth opportunities.

Regions Info

  • North America
    99%
  • Europe Developed
    1%

Geographically, the portfolio is almost entirely invested in North America, with a minimal allocation to developed Europe. This heavy concentration in the US market limits exposure to potential growth in other regions and increases vulnerability to US-specific economic downturns. Expanding geographic diversification could capture growth in emerging markets and reduce region-specific risks.

Market capitalization Info

  • Mega-cap
    46%
  • Large-cap
    33%
  • Mid-cap
    19%
  • Small-cap
    2%

The focus on mega and big-cap stocks (79% combined) aligns with the portfolio's growth and moderate risk profile, offering stability and potential for appreciation. However, the limited exposure to medium and small-cap stocks reduces opportunities for higher growth rates that these segments can offer. Incrementally increasing exposure to smaller cap stocks could enhance growth potential while adding moderate risk.

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.

Based on the Efficient Frontier analysis, this portfolio could benefit from optimization to achieve a better risk-return ratio. Currently, the heavy concentration in tech-focused equities and lack of diversification across asset classes and geographies suggest that the portfolio is not positioned on the Efficient Frontier. Adjusting the asset allocation to include a broader mix of sectors, asset classes, and geographies could enhance returns for the given level of risk.

Dividends Info

  • Invesco QQQ Trust 0.50%
  • Vanguard S&P 500 ETF 1.20%
  • Weighted yield (per year) 1.09%

The portfolio's dividend yield stands at 1.09%, which contributes to its total return. While not the primary focus of a growth-oriented portfolio, dividends offer a source of passive income and can provide a cushion during market volatility. Considering investments with higher dividend yields or diversified dividend sources could enhance income without significantly altering the portfolio's risk profile.

Ongoing product costs Info

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

The total expense ratio (TER) of 0.05% is impressively low, which is beneficial for long-term performance as lower costs translate directly into higher net returns for investors. This aspect of the portfolio is well-optimized, indicating efficient management of investment costs.

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