Aggressive Low Diversity Portfolio Heavily Weighted in Technology and Consumer Cyclicals with High Risk and Strong Historic Performance Potential

Report created on Dec 2, 2024

Risk profile Info

6/7
Aggressive
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

The portfolio is heavily concentrated in a few stocks, with Amazon and NVIDIA making up nearly half of the total allocation. This indicates a strong focus on technology and high-growth companies. Such a concentration can lead to significant volatility, as the performance of these few stocks will greatly impact the overall portfolio. While this can lead to high returns if these companies perform well, it also increases risk. To mitigate this, consider diversifying into more sectors and asset classes to balance potential gains with risk management.

Growth Info

The historical performance of the portfolio shows an impressive CAGR of 30.46%, indicating strong growth over time. However, this comes with a max drawdown of -39.54%, reflecting the high volatility and risk associated with such a concentrated portfolio. The fact that only 15 days account for 90% of returns highlights the reliance on a few high-performing days. To sustain such growth while managing risk, it's crucial to regularly review and adjust the portfolio composition, ensuring a balance between high-growth potential and risk exposure.

Projection Info

Using a Monte Carlo simulation with 1,000 iterations, we project potential future performance of the portfolio. This simulation provides a range of possible outcomes by considering different market scenarios. The results show a wide variance, with a 5th percentile outcome of -97.78% and a 67th percentile of 426.29%. While there's a significant chance for high returns, there's also a risk of substantial losses. To navigate these uncertainties, a strategic approach to diversification and risk management is essential, aligning investments with long-term goals and risk tolerance.

Asset classes Info

  • Stocks
    100%

The portfolio is overwhelmingly invested in stocks, comprising nearly 100% of the allocation. This lack of diversification across asset classes increases exposure to market volatility. While stocks can offer high returns, they also carry significant risk, especially in a concentrated portfolio. Incorporating other asset classes, such as bonds or real estate, could provide stability and reduce overall risk. Balancing stocks with less volatile assets can help smooth out returns and protect against market downturns, aligning the portfolio more closely with a long-term investment strategy.

Sectors Info

  • Technology
    44%
  • Consumer Discretionary
    32%
  • Financials
    7%
  • Telecommunications
    5%
  • Industrials
    4%
  • Consumer Staples
    4%
  • Health Care
    3%

Technology and consumer cyclicals dominate the sector allocation, making up nearly 75% of the portfolio. This heavy reliance on a few sectors increases vulnerability to sector-specific risks, such as regulatory changes or shifts in consumer demand. While these sectors can offer high growth potential, diversification into other sectors could mitigate risk and provide more balanced exposure. By spreading investments across a wider range of industries, the portfolio can better withstand economic fluctuations and capitalize on opportunities in varied market conditions.

Regions Info

  • North America
    100%

The portfolio's geographic allocation is heavily skewed towards North America, with over 99% of investments concentrated in this region. This lack of geographic diversification exposes the portfolio to regional economic risks and limits potential growth opportunities in other parts of the world. Expanding into international markets could provide exposure to different economic cycles and growth drivers. By diversifying geographically, the portfolio can benefit from global market trends and reduce reliance on the North American economy, enhancing long-term growth prospects.

Redundant positions Info

  • Vanguard Total Stock Market Index Fund ETF Shares
    Vanguard S&P 500 ETF
    High correlation

The portfolio contains highly correlated assets, particularly the Vanguard ETFs, which offer little diversification benefit. These correlations mean that the assets tend to move together, reducing the overall risk-reduction potential of diversification. To improve diversification, consider reducing exposure to overlapping assets and increasing allocations to less correlated investments. By doing so, the portfolio can better manage risk and enhance returns through exposure to a wider range of market movements, ultimately achieving a more balanced investment strategy.

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 the portfolio, focus on reducing highly correlated assets that offer no diversification benefits. By eliminating these overlaps, the portfolio can achieve a more balanced risk-return profile. To adjust risk levels, consider moving along the efficient frontier. A shift towards riskier assets could enhance potential returns, while a more conservative allocation can provide stability. This strategic repositioning can help align the portfolio with long-term financial goals, ensuring a tailored approach to risk management and growth potential.

Dividends Info

  • Apple Inc 0.40%
  • Applied Materials Inc 0.60%
  • Broadcom Inc 1.30%
  • Costco Wholesale Corp 2.00%
  • Mastercard Inc 0.50%
  • Microsoft Corporation 0.50%
  • Micron Technology Inc 0.50%
  • Thermo Fisher Scientific Inc 0.30%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.20%
  • Weighted yield (per year) 0.35%

The portfolio's dividend yield is relatively low at 0.35%, reflecting its focus on growth stocks rather than income-generating investments. While growth stocks can offer substantial capital appreciation, they typically provide lower dividend income. For investors seeking a balance between growth and income, incorporating more dividend-paying stocks could enhance the portfolio's income potential. This approach can provide a steady cash flow, complementing capital gains and offering a more comprehensive return profile, especially in volatile market conditions.

Ongoing product costs Info

  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%

The portfolio benefits from low costs, particularly with the Vanguard ETFs, which have expense ratios of just 0.03%. Low costs are crucial for maximizing net returns, as they minimize the drag on performance. Keeping investment costs low is a key strategy for enhancing long-term returns, allowing more of the portfolio's growth to compound over time. To maintain this advantage, regularly review the cost structure of all investments and consider low-cost options when rebalancing or adding to the portfolio, ensuring that expenses remain minimal.

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