A high-risk speculative portfolio with concentrated stock exposure and limited geographic diversification

Report created on Dec 7, 2024

Risk profile Info

7/7
Speculative
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

The portfolio is heavily weighted towards equities, with a significant concentration in ETFs like the Vanguard S&P 500 and Avantis U.S. Small Cap Value. With almost 100% of the assets in stocks, it lacks diversification, which means it's highly sensitive to market fluctuations. Such a composition can lead to amplified returns in bull markets but may also result in substantial losses during downturns. To balance risk, consider introducing other asset classes like bonds or real estate, which can provide stability and income diversification.

Growth Info

Historically, the portfolio has demonstrated a high compound annual growth rate (CAGR) of 30.46%, suggesting strong performance in favorable market conditions. However, this comes with a significant maximum drawdown of -73.06%, highlighting the potential for substantial losses. Relying on historical performance can be misleading, as past success doesn't guarantee future results. It's crucial to understand that such volatility requires a high risk tolerance. Diversifying into less volatile assets could help mitigate the risk of large drawdowns.

Projection Info

Utilizing Monte Carlo simulations, the portfolio's future performance is projected using historical data. These simulations indicate a wide range of outcomes, with the 50th percentile showing a potential loss of 49.04% and the 67th percentile suggesting a gain of 146.62%. While simulations provide insights into possible future scenarios, they're limited by the assumption that past market conditions will persist. This highlights the importance of preparing for various market environments. Consider adjusting the portfolio to improve the likelihood of achieving more favorable outcomes.

Asset classes Info

  • Stocks
    100%

The portfolio's allocation is nearly entirely in stocks, with a negligible amount in cash. This heavy reliance on a single asset class increases exposure to market volatility. While stocks offer growth potential, they also carry higher risk compared to other asset classes like bonds or real estate. Diversifying into different asset classes can reduce risk and improve long-term stability. Consider incorporating fixed-income securities or alternative investments to enhance portfolio resilience during market downturns.

Sectors Info

  • Basic Materials
    27%
  • Technology
    18%
  • Industrials
    14%
  • Financials
    12%
  • Consumer Discretionary
    8%
  • Health Care
    6%
  • Telecommunications
    5%
  • Energy
    4%
  • Consumer Staples
    4%
  • Utilities
    1%
  • Real Estate
    1%

The portfolio's sector allocation is dominated by basic materials, technology, and industrials, with smaller allocations in other sectors. This concentration can lead to increased volatility if these sectors underperform. Sector diversification is important for reducing risk and capitalizing on different economic cycles. Consider rebalancing to achieve a more balanced sector allocation, which can help mitigate the impact of sector-specific downturns and improve overall portfolio stability.

Regions Info

  • North America
    99%

With over 99% of the portfolio's assets in North America, geographic diversification is limited. This concentration exposes the portfolio to regional economic and political risks. Geographic diversification can help reduce risk by spreading investments across different countries and regions, benefiting from global growth opportunities. Consider increasing exposure to international markets to enhance diversification and reduce reliance on North American markets, potentially improving risk-adjusted returns.

Redundant positions Info

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

The portfolio contains highly correlated assets, such as the Vanguard S&P 500 ETF and Vanguard Total Stock Market Index Fund ETF Shares. High correlation means these assets tend to move in the same direction, offering limited diversification benefits. Reducing correlation by adding assets that behave differently in various market conditions can improve risk management. Consider replacing or reducing exposure to correlated assets and introducing less correlated investments to achieve a more balanced portfolio.

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 can be optimized using the Efficient Frontier to achieve a better risk-return balance. This involves adjusting the current asset allocation to enhance the portfolio's efficiency, focusing on maximizing returns for a given level of risk. Before optimization, it's crucial to address the high correlation between certain assets, as diversification is key to reducing risk. Consider reallocating between existing assets to move closer to the Efficient Frontier, improving the portfolio's risk-adjusted performance.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.50%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.20%
  • Weighted yield (per year) 0.87%

The portfolio's dividend yield is relatively low at 0.87%, indicating limited income generation from dividends. While growth-focused portfolios often prioritize capital appreciation over income, dividends can provide a stable income stream and reduce reliance on capital gains. Consider incorporating higher-yielding investments to enhance income potential, which can be particularly beneficial during periods of market volatility or low capital appreciation.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Weighted costs total (per year) 0.06%

The portfolio's total expense ratio (TER) is 0.06%, reflecting low costs primarily due to the Vanguard ETFs. Lower costs can significantly enhance long-term returns by minimizing the drag on performance. While the current cost structure is efficient, it's essential to remain vigilant about fees when considering new investments. Prioritize low-cost options to maintain cost efficiency, ensuring that any new additions to the portfolio do not disproportionately increase the overall expense ratio.

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