Growth-Focused Portfolio with High Risk and Low Diversification in Predominantly US Stocks

Report created on Dec 2, 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 mainly consists of three ETFs: Fidelity Magellan, Invesco NASDAQ 100, and Vanguard S&P 500. With 40% in the Fidelity Magellan ETF, the portfolio is heavily weighted towards this single fund. The other two ETFs contribute 30% each, resulting in a concentrated portfolio. This limited number of holdings means the portfolio lacks diversity, which could increase its vulnerability to market fluctuations. To improve diversification, consider adding more asset classes or funds to spread risk.

Growth Info

Historically, the portfolio has performed well with a CAGR of 14.45%, reflecting its growth-focused nature. However, the maximum drawdown of -30.83% indicates significant volatility, which aligns with the high-risk classification. The performance is concentrated, with 90% of returns occurring over just 15 days, highlighting the importance of timing. To mitigate risk, consider diversifying into less volatile assets, which could help smooth out returns over time and reduce the impact of market downturns.

Projection Info

Using a Monte Carlo simulation, the portfolio's potential future performance was analyzed. With 1,000 simulations, the median return was 494.24%, and an annualized return of 15.5% was observed. This suggests a strong growth potential but also highlights the inherent risk, as 5% of simulations resulted in just a 64.76% return. To prepare for various outcomes, it's wise to maintain a balanced approach, ensuring the portfolio can weather different market conditions.

Asset classes Info

  • Stocks
    100%

The portfolio is almost entirely composed of stocks, with a negligible portion in cash. This heavy stock allocation aligns with a growth strategy but exposes the portfolio to market volatility. By incorporating other asset classes, such as bonds, the portfolio could achieve better risk-adjusted returns. Adding fixed-income investments can provide stability and income, especially during market downturns, making the portfolio more resilient.

Sectors Info

  • Technology
    39%
  • Telecommunications
    11%
  • Consumer Discretionary
    11%
  • Industrials
    10%
  • Health Care
    10%
  • Financials
    8%
  • Consumer Staples
    4%
  • Basic Materials
    3%
  • Energy
    1%
  • Utilities
    1%
  • Real Estate
    1%

The sector allocation reveals a heavy concentration in technology at nearly 39%, followed by communication services and consumer cyclicals. This focus on growth sectors can drive returns but also increases risk, especially if these sectors underperform. To reduce sector-specific risk, consider diversifying into more defensive sectors like utilities or consumer defensive. This can help balance the portfolio and provide stability during economic downturns.

Regions Info

  • North America
    99%
  • Europe Developed
    1%

Geographically, the portfolio is overwhelmingly concentrated in North America, with over 98% exposure. This lack of international diversification can lead to increased risk if the US market underperforms. To mitigate this, consider allocating funds to international markets, which can provide exposure to different economic cycles and growth opportunities. Diversifying geographically can enhance the portfolio's resilience and potential for long-term growth.

Redundant positions Info

  • Vanguard S&P 500 ETF
    Fidelity Covington Trust - Fidelity Magellan ETF
    High correlation

The portfolio's asset correlation shows a high similarity between the Vanguard S&P 500 ETF and Fidelity Magellan ETF, reducing diversification benefits. This overlap means that these assets are likely to move in the same direction, increasing portfolio risk. To enhance diversification, consider replacing one of these ETFs with a fund that has a lower correlation. This can help spread risk and improve the portfolio's overall risk-return profile.

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 optimization potential is limited by its high correlation between assets. Before optimizing, focus on reducing overlap and increasing diversification. To achieve a riskier portfolio, consider allocating more to high-growth sectors or reducing bond exposure. For a more conservative approach, increase allocations to stable sectors or fixed-income assets. Moving along the efficient frontier involves balancing risk and return to meet personal investment goals.

Dividends Info

  • Fidelity Covington Trust - Fidelity Magellan ETF 0.20%
  • Invesco NASDAQ 100 ETF 0.60%
  • Vanguard S&P 500 ETF 1.20%
  • Weighted yield (per year) 0.62%

The portfolio's dividend yield stands at 0.62%, with the Vanguard S&P 500 ETF contributing the most at 1.2%. While dividends aren't the primary focus for growth portfolios, they can provide a steady income stream. To enhance income, consider incorporating higher-yielding assets. This can help generate cash flow, which can be reinvested to compound returns or provide income during market downturns, enhancing the portfolio's overall performance.

Ongoing product costs Info

  • Fidelity Covington Trust - Fidelity Magellan ETF 0.59%
  • Invesco NASDAQ 100 ETF 0.15%
  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.29%

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