Balanced Risk Portfolio with Low Diversification and High US Stock Exposure

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

Balanced Investors

This portfolio suits a balanced investor seeking growth with moderate risk tolerance. Ideal for those with a long-term horizon, who can withstand market volatility. The investor values capital appreciation over income, with a preference for US equities. While comfortable with concentrated holdings, they should be open to diversification for risk management. This investor is likely to have a strong belief in the US market's potential and is willing to accept short-term fluctuations for the prospect of higher long-term gains.

Positions

  • Vanguard S&P 500 ETF
    VOO - US9229083632
    94.87%
  • Invesco NASDAQ 100 ETF
    QQQM - US46138G6492
    5.13%

The portfolio is heavily weighted towards two ETFs: Vanguard S&P 500 ETF at around 95% and Invesco NASDAQ 100 ETF at about 5%. This composition indicates a strong focus on large-cap US equities, reflecting a low diversification strategy. While this may offer potential for substantial returns, it also exposes the portfolio to market fluctuations predominantly in the US market. To enhance diversification, consider incorporating a broader range of asset classes and geographic regions, which can help mitigate risk and improve stability over time.

Growth Info

The portfolio has demonstrated strong historical performance, with a compound annual growth rate (CAGR) of 15.81% and a maximum drawdown of -24.98%. This indicates robust growth potential but also highlights significant volatility. The concentration in US equities suggests that the portfolio has benefited from the strong performance of the US market. However, reliance on a limited number of assets may result in heightened risk during market downturns. To maintain consistent performance, consider balancing growth with risk management by diversifying into other asset classes and regions.

Projection Info

Using a Monte Carlo simulation with 1,000 iterations, the portfolio shows promising forward projections, with a median end portfolio value increase of 673.32%. The simulation, which uses random sampling to predict future outcomes, suggests a high likelihood of positive returns, with 997 simulations showing gains. However, the high correlation between assets may limit the portfolio's ability to adapt to changing market conditions. To potentially enhance future performance, consider exploring opportunities for diversification and reducing asset correlation.

Asset classes Info

  • Stocks
    100%
  • Cash
    0%

The portfolio's asset class allocation is heavily skewed towards stocks, making up nearly 100% of the holdings, with a negligible cash position. This allocation leans towards a high-risk, high-reward strategy, suitable for investors seeking capital appreciation. However, the lack of bonds or alternative assets may increase vulnerability to market volatility. To reduce risk and enhance stability, consider incorporating fixed income or alternative assets, which can provide diversification benefits and help cushion against downturns in equity markets.

Sectors Info

  • Technology
    34%
  • Financials
    12%
  • Health Care
    11%
  • Consumer Discretionary
    10%
  • Telecommunications
    9%
  • Industrials
    7%
  • Consumer Staples
    6%
  • Energy
    3%
  • Utilities
    3%
  • Real Estate
    2%
  • Basic Materials
    2%

Sector allocation within the portfolio is concentrated, with technology dominating at nearly 34%, followed by financial services and healthcare. This concentration may lead to significant exposure to sector-specific risks, especially in technology. While this can drive growth during favorable market conditions, it may also result in considerable volatility. To mitigate sector-specific risks, consider diversifying across a wider range of sectors, which can help balance growth potential with risk management and provide a more resilient portfolio.

Regions Info

  • North America
    99%
  • Europe Developed
    1%
  • Asia Developed
    0%
  • Latin America
    0%
  • Asia Emerging
    0%

Geographically, the portfolio is overwhelmingly focused on North America, with over 99% of assets allocated there. This heavy concentration on the US market means the portfolio is highly susceptible to domestic economic and political changes. Although this focus has historically driven strong returns, it limits exposure to growth opportunities in other regions. To enhance geographic diversification and potentially capture growth in emerging markets, consider allocating a portion of the portfolio to international equities or funds with broader regional exposure.

Redundant positions Info

  • Invesco NASDAQ 100 ETF
    Vanguard S&P 500 ETF
    High correlation

The portfolio's assets are highly correlated, particularly between the Vanguard S&P 500 ETF and the Invesco NASDAQ 100 ETF. This high correlation suggests that the portfolio's assets tend to move in the same direction, which can amplify risk during market downturns. While correlated assets can simplify management, they may also limit diversification benefits. To reduce risk and enhance diversification, consider incorporating assets with lower correlations, which can help balance the portfolio and improve resilience against market volatility.

Dividends Info

  • Invesco NASDAQ 100 ETF 0.60%
  • Vanguard S&P 500 ETF 1.20%
  • Weighted yield (per year) 1.17%

The portfolio offers a moderate dividend yield of 1.17%, with contributions from both the Vanguard S&P 500 ETF and the Invesco NASDAQ 100 ETF. This yield provides a modest income stream, which can be beneficial for reinvestment or income generation. However, the focus on growth-oriented equities means the yield is not the primary driver of returns. To enhance income potential, consider exploring higher-yielding assets or funds that focus on dividend-paying stocks, which can provide a more balanced approach between growth and income.

Ongoing product costs Info

  • Invesco NASDAQ 100 ETF 0.15%
  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.04%

The portfolio benefits from low costs, with a total expense ratio (TER) of 0.04%. This low-cost structure is advantageous, as it minimizes the drag on returns and allows more of the portfolio's growth to be realized by the investor. Keeping costs low is a key component of successful investing, as it can significantly impact long-term performance. To maintain this advantage, continue prioritizing low-cost investment options and monitor any changes in fees, ensuring that the portfolio remains cost-efficient over time.

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.

Portfolio optimization suggests that the current allocation may not be on the efficient frontier due to high asset correlation. The efficient frontier represents the set of optimal portfolios offering the highest expected return for a defined level of risk. With overlapping assets, the portfolio may not fully capitalize on diversification benefits. To potentially enhance risk-adjusted returns, consider rebalancing towards a more diversified allocation, incorporating assets with different risk and return profiles. This can help position the portfolio closer to the efficient frontier, optimizing performance.

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