High-Risk Low-Diversity Portfolio with Strong Historical Performance and Growth Potential for Risk-Tolerant Investors

Report created on Dec 3, 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 weighted towards the Avantis® U.S. Small Cap Value ETF, comprising a significant 77.01% of the total allocation, while the Invesco NASDAQ 100 ETF makes up the remaining 22.99%. This composition indicates a strong preference for U.S. equities, particularly small-cap value stocks and large-cap growth stocks. While this concentration can lead to impressive returns during favorable market conditions, it also exposes the portfolio to higher volatility and potential risks.

Growth Info

Historically, the portfolio has demonstrated impressive performance, with a compound annual growth rate (CAGR) of 22.29%. This suggests strong past returns, but it also experienced a maximum drawdown of -22.4%, indicating significant volatility. The concentrated nature of the portfolio means that returns are driven by a few key days, with 90% of gains occurring over just 24 days. This highlights the potential for both large gains and losses, emphasizing the need for careful monitoring and risk management.

Projection Info

Using a Monte Carlo simulation with 1,000 iterations, the portfolio shows a wide range of potential future outcomes. The 5th percentile projects a modest 176.9% return, while the median (50th percentile) suggests an impressive 1,129.5% return. The simulations indicate a high probability of positive returns, with 998 out of 1,000 scenarios yielding gains. This forward projection underscores the portfolio's potential for substantial growth, albeit with inherent risks due to its concentrated nature.

Asset classes Info

  • Stocks
    100%

The portfolio is almost entirely composed of stocks, with a negligible cash position of 0.11%. This high equity allocation aligns with a growth-focused investment strategy, aiming for capital appreciation. However, the lack of diversification across asset classes increases exposure to market volatility. To mitigate risk, consider incorporating other asset classes like bonds or alternative investments, which can provide stability and reduce overall portfolio volatility.

Sectors Info

  • Financials
    23%
  • Technology
    17%
  • Industrials
    15%
  • Consumer Discretionary
    15%
  • Energy
    11%
  • Basic Materials
    5%
  • Telecommunications
    5%
  • Consumer Staples
    5%
  • Health Care
    3%

The portfolio spans various sectors, with significant allocations in financial services (22.58%), technology (16.61%), and industrials (15.42%). While this sector spread provides some diversification, the heavy concentration in a few sectors can lead to increased risk if these sectors underperform. Consider diversifying further across additional sectors to balance potential downturns in any single area, enhancing the portfolio's resilience to sector-specific risks.

Regions Info

  • North America
    98%
  • Latin America
    1%
  • Europe Developed
    1%
  • Asia Emerging
    1%

Geographically, the portfolio is overwhelmingly focused on North America, with 97.81% of assets allocated there. This concentration exposes the portfolio to regional economic and political risks. Although there are minor allocations in other regions, they are negligible. To reduce geographic risk, consider diversifying into international markets, which can provide exposure to different economic cycles and potentially enhance returns through global opportunities.

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.

The portfolio's current structure offers limited optimization opportunities due to its concentrated nature. To pursue a more risk-averse approach, consider reallocating towards a mix of equities and bonds, moving along the efficient frontier to achieve a more balanced risk-return profile. Conversely, for a riskier portfolio, increasing equity exposure or exploring higher-growth sectors could be considered. Focus should initially be on enhancing diversification across asset classes and geographic regions to optimize overall performance.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.50%
  • Invesco NASDAQ 100 ETF 0.60%
  • Weighted yield (per year) 1.29%

The portfolio's dividend yield stands at 1.29%, with the Avantis® U.S. Small Cap Value ETF offering 1.5% and the Invesco NASDAQ 100 ETF providing 0.6%. While not a primary income source, these dividends offer a modest return that can be reinvested to enhance growth. For those seeking higher income, consider increasing allocations to dividend-focused investments, which can provide a more substantial yield while still contributing to the portfolio's growth objectives.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Invesco NASDAQ 100 ETF 0.15%
  • Weighted costs total (per year) 0.23%

The portfolio's total expense ratio (TER) is 0.23%, with the Avantis® U.S. Small Cap Value ETF at 0.25% and the Invesco NASDAQ 100 ETF at 0.15%. These costs are relatively low, which is beneficial for long-term compounding. Keeping investment costs low is crucial, as high fees can erode returns over time. Regularly review and compare these costs with other investment options to ensure the portfolio remains cost-effective and aligned with financial goals.

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