High-Risk Low-Diversity Portfolio with Strong Tech Focus and Impressive Historical Performance but Limited Geographic Reach

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 large-cap tech stocks, with Amazon and Alphabet making up a significant portion. This kind of concentration can lead to high volatility, as the performance of these few stocks will heavily influence the entire portfolio. While this can lead to substantial gains if these stocks perform well, it also means that any downturns in these companies could greatly impact the portfolio's value. Diversifying across more stocks or sectors could help reduce this risk and provide a more stable performance over time.

Growth Info

Historically, the portfolio has shown an impressive compound annual growth rate of 29.23%, which is quite remarkable. However, this comes with a max drawdown of -59.53%, indicating significant risk. The fact that 90% of returns are concentrated in just 28 days suggests that timing plays a crucial role in this portfolio's success. This kind of performance is typical for a high-risk, high-reward strategy. To mitigate potential losses, consider incorporating more stable investments that can provide a buffer during downturns.

Projection Info

Using a Monte Carlo simulation with 1,000 iterations, the portfolio shows a wide range of potential outcomes, with a 5th percentile return of 34.55% and a median return of 2,303.53%. This indicates a high level of uncertainty but also the potential for significant gains. The simulation highlights the importance of understanding the risk associated with such a concentrated portfolio. To better manage this risk, consider adjusting the portfolio to include more diversified investments, which could lead to more consistent returns over time.

Asset classes Info

  • Stocks
    100%

The portfolio is overwhelmingly invested in stocks, with a tiny fraction in cash. This allocation aligns with an aggressive investment strategy, aiming for high returns at the expense of increased volatility. While this can be beneficial in a bull market, it leaves the portfolio vulnerable during market downturns. Diversifying into other asset classes, such as bonds or real estate, could help balance risk and provide more consistent returns. A more balanced asset allocation could also help smooth out the portfolio's performance over time.

Sectors Info

  • Consumer Discretionary
    57%
  • Telecommunications
    20%
  • Technology
    19%
  • Financials
    1%
  • Health Care
    1%
  • Industrials
    1%

The sector allocation is heavily skewed towards consumer cyclicals and communication services, with a significant portion in technology as well. This concentration means the portfolio is highly exposed to the performance of these sectors. While these sectors have shown strong growth in recent years, they are also susceptible to market fluctuations. To reduce sector-specific risk, consider diversifying into sectors that are less correlated with these industries. This could help protect the portfolio from downturns in any single sector.

Regions Info

  • North America
    100%

Geographically, the portfolio is almost entirely focused on North America, with minimal exposure to other regions. While this concentration can benefit from the strong performance of the U.S. market, it also means the portfolio is vulnerable to any economic downturns in the region. Expanding into international markets could provide a buffer against regional risks and offer exposure to growth opportunities in other parts of the world. Diversifying geographically can also help reduce the portfolio's overall risk.

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 optimization chart suggests opportunities for improvement through diversification. By moving along the efficient frontier, one can achieve a riskier or more conservative portfolio. To lower risk, consider increasing exposure to bonds or other low-volatility assets. For a more aggressive approach, maintain the current allocation but be prepared for potential drawdowns. Focusing on diversification and reducing correlation among assets can enhance overall portfolio performance. Prioritizing these areas will help optimize the portfolio's risk-return profile.

Dividends Info

  • Alphabet Inc Class C 0.20%
  • Universal Display 0.90%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.20%
  • Weighted yield (per year) 0.14%

The portfolio's overall dividend yield is quite low, at 0.14%, indicating a focus on growth rather than income. While this can be beneficial for capital appreciation, it means the portfolio lacks the stability and income provided by higher-yielding investments. To improve the portfolio's income potential, consider adding dividend-paying stocks or funds. This could provide a steady stream of income and reduce reliance on capital gains for returns. A balanced approach can offer both growth and income.

Ongoing product costs Info

  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%

With the Vanguard Total Stock Market Index Fund ETF Shares having a low expense ratio of 0.03%, the portfolio's costs are kept minimal. This is advantageous as it allows more of the portfolio's returns to be retained. Low costs are a crucial aspect of long-term investing, as they can significantly impact overall returns. To maintain this advantage, continue to focus on investments with low fees. This will help maximize the portfolio's performance over time and keep costs from eating into returns.

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