High-Risk Growth Portfolio with Strong Tech Focus and Moderate Diversification

Report created on Dec 5, 2024

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

The portfolio is heavily weighted towards ETFs, with a significant portion allocated to Invesco QQQ Trust and SPDR S&P 500 ETF Trust, making up over 76% of the total. This indicates a strong preference for broad market exposure, particularly in the U.S. It also includes a smaller allocation to individual stocks, such as The Boeing Company. The composition suggests an inclination towards growth-oriented investments, with a focus on technology and large-cap equities. To optimize, consider balancing the allocation by diversifying into other asset classes or sectors to reduce concentration risk.

Growth Info

Historically, the portfolio has demonstrated impressive performance with a CAGR of 16.7%, indicating strong growth potential. However, it also experienced a significant maximum drawdown of -31.66%, reflecting the inherent risk associated with such a growth-focused strategy. The portfolio's returns are concentrated, with 90% of gains occurring over just 38 days. This volatility suggests a need for careful risk management. To improve resilience, consider strategies that can buffer against market downturns, potentially through increased diversification or risk-hedging instruments.

Projection Info

The Monte Carlo simulation, which uses random sampling to predict future outcomes, indicates a wide range of potential returns. With a median projection of 354.25% and a 67th percentile of 564.54%, the outlook is optimistic but not without risk. The 5th percentile suggests a possible decline of -2.27%, highlighting the uncertainty in future performance. Given this variability, maintaining a diversified approach and regularly reviewing the portfolio's risk profile could help mitigate potential downside risks while capitalizing on growth opportunities.

Asset classes Info

  • Stocks
    100%

The portfolio is overwhelmingly composed of equities, with stocks accounting for over 99% of the assets. This high equity allocation aligns with a growth-oriented strategy but also increases exposure to market volatility. The minimal cash and other asset allocations provide little cushion against market downturns. To reduce risk, consider incorporating more fixed-income securities or alternative investments that can offer stability and income. This can help create a more balanced portfolio that can better withstand market fluctuations while still capturing growth.

Sectors Info

  • Technology
    47%
  • Consumer Discretionary
    11%
  • Telecommunications
    10%
  • Health Care
    7%
  • Industrials
    7%
  • Financials
    7%
  • Consumer Staples
    5%
  • Energy
    2%
  • Utilities
    2%
  • Basic Materials
    2%
  • Real Estate
    1%

There's a strong sector concentration, with nearly half of the portfolio invested in technology. Other significant sectors include consumer cyclicals and communication services. This concentration in tech can drive strong returns during bull markets but also poses risks if the sector underperforms. Diversifying across more sectors can help mitigate this risk, ensuring the portfolio is not overly reliant on the performance of any single industry. A more balanced sector allocation can provide stability and enhance long-term growth prospects.

Regions Info

  • North America
    94%
  • Europe Developed
    3%
  • Asia Emerging
    1%
  • Japan
    1%
  • Asia Developed
    1%

Geographically, the portfolio is heavily weighted towards North America, with over 93% of assets allocated there. This concentration might limit exposure to international growth opportunities and increase vulnerability to regional economic downturns. Diversifying into emerging markets or other global regions could capture additional growth potential and reduce regional risk. A more geographically balanced portfolio can provide a hedge against localized economic issues and benefit from global market trends.

Redundant positions Info

  • Invesco QQQ Trust
    Vanguard Information Technology Index Fund ETF Shares
    High correlation

The portfolio contains highly correlated assets, particularly between the Invesco QQQ Trust and Vanguard Information Technology Index Fund ETF Shares. This correlation suggests overlapping exposure, which may not provide the diversification benefits typically sought in a portfolio. Reducing these overlaps by selecting assets with lower correlations can enhance diversification and reduce risk. This strategy can help smooth out returns and protect against sector-specific downturns, ultimately leading to a more robust portfolio.

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, it's crucial to address the portfolio's high correlation and sector concentration. By reducing overlapping assets, particularly in technology, diversification can improve. Moving along the efficient frontier can help achieve a more balanced risk-return profile. To make the portfolio riskier, increase exposure to growth sectors or equities. For a more conservative approach, consider adding bonds or income-generating assets. This strategic adjustment can align the portfolio with specific financial goals and risk preferences.

Dividends Info

  • iShares MSCI Emerging Markets ETF 2.40%
  • iShares MSCI EAFE ETF 2.90%
  • iShares Russell Mid-Cap Growth ETF 0.50%
  • Invesco QQQ Trust 0.60%
  • SPDR S&P 500 ETF Trust 1.20%
  • Vanguard Information Technology Index Fund ETF Shares 0.60%
  • Weighted yield (per year) 0.92%

The portfolio's dividend yield stands at 0.92%, which is relatively low, reflecting its growth-oriented nature. While dividends can provide a steady income stream, this portfolio prioritizes capital appreciation over income generation. For investors seeking higher income, increasing exposure to dividend-paying stocks or income-focused funds may be beneficial. However, maintaining a balance between growth and income is crucial to ensure the portfolio aligns with long-term financial goals and risk tolerance.

Ongoing product costs Info

  • iShares MSCI Emerging Markets ETF 0.70%
  • iShares MSCI EAFE ETF 0.33%
  • iShares Russell Mid-Cap Growth ETF 0.23%
  • Invesco QQQ Trust 0.20%
  • SPDR S&P 500 ETF Trust 0.10%
  • Vanguard Information Technology Index Fund ETF Shares 0.10%
  • Weighted costs total (per year) 0.16%

The portfolio's total expense ratio (TER) is 0.16%, indicating cost-effective management. Lower costs can significantly enhance long-term returns, as high fees can erode gains over time. The most expensive holdings, such as the iShares MSCI Emerging Markets ETF, have a higher expense ratio of 0.7%. To further reduce costs, consider evaluating the necessity of higher-cost funds and exploring alternatives with similar exposure but lower fees. Keeping costs low while maintaining the desired asset allocation can optimize portfolio performance.

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