Portfolio heavily focused on tech stocks with low diversification and high risk suitable for growth-oriented investors

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 is predominantly composed of common stocks, with Microsoft Corporation taking up 55.98% and NVIDIA Corporation at 25.38%. The remainder is spread across ETFs like SPDR S&P 500, Vanguard Total Stock Market, and Invesco QQQ Trust. This composition indicates a strong bias towards individual tech stocks, which can lead to higher volatility. It's crucial to ensure that the portfolio aligns with the investor's risk tolerance and goals. Rebalancing might be necessary to achieve a more diversified and balanced portfolio that can withstand market fluctuations better.

Growth Info

Historically, this portfolio has shown impressive performance with a compound annual growth rate (CAGR) of 35.09%. However, the maximum drawdown of -58.27% indicates significant volatility and potential for large losses. The concentration in tech stocks can lead to high returns but also increases vulnerability during market downturns. It's important to consider the historical volatility when planning for future investments. Diversifying across sectors and asset classes can help mitigate the risk of large drawdowns while still enjoying potential growth.

Projection Info

A Monte-Carlo simulation was run with 1,000 simulations, using a hypothetical initial investment. The results show a wide range of potential outcomes, with the 5th percentile at 325.66% and the 50th percentile at 3,353.34%. The 67th percentile is at 5,454.46%, indicating possible high returns. However, with an annualized return of 33.0%, the portfolio remains highly volatile. The simulation underscores the importance of considering both potential returns and risks. It's advisable to assess if the potential rewards align with the investor's risk tolerance and long-term goals.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily weighted towards stocks, comprising 99.98% of the asset allocation, with a negligible 0.02% in cash. This single asset class focus increases the portfolio's risk profile, making it vulnerable to market volatility. While stocks can offer high returns, diversifying into other asset classes like bonds can provide stability and reduce overall risk. Reassessing the asset class allocation can help align the portfolio with the investor's risk tolerance and financial goals, ensuring a more balanced approach to investing.

Sectors Info

  • Technology
    88%
  • Financials
    2%
  • Consumer Discretionary
    2%
  • Health Care
    2%
  • Telecommunications
    2%
  • Industrials
    1%
  • Consumer Staples
    1%
  • Energy
    1%

The sector allocation is overwhelmingly concentrated in technology, which makes up 87.60% of the portfolio. Other sectors like financial services, consumer cyclicals, and healthcare have minimal representation. This heavy tech focus can lead to significant volatility and risk, especially if the tech sector faces downturns. Diversifying across various sectors can help mitigate sector-specific risks and provide a more balanced exposure to different parts of the economy. A more even sector allocation can enhance the portfolio's resilience against market fluctuations.

Regions Info

  • North America
    100%

Geographically, the portfolio is almost entirely concentrated in North America, with 99.89% of assets based there. This lack of geographic diversification exposes the portfolio to regional economic risks and limits exposure to growth opportunities in other parts of the world. While North American markets have been strong, diversifying into other developed and emerging markets can provide additional growth potential and reduce regional risk. Rebalancing the geographic allocation can help achieve a more globally diversified portfolio that aligns with the investor's long-term goals.

Redundant positions Info

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

The portfolio exhibits high correlation among its assets, particularly between the Vanguard Total Stock Market Index Fund ETF Shares and SPDR S&P 500 ETF Trust. This correlation indicates that these assets tend to move in the same direction, which reduces the diversification benefits. High asset correlation can lead to increased portfolio risk during market downturns. It's important to evaluate the correlations and consider diversifying into assets with lower correlations to improve the portfolio's risk-adjusted returns and enhance overall stability.

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, it's crucial to address the high correlation and overlap in the portfolio. Removing or reducing positions in highly correlated assets can enhance diversification and reduce risk. Once addressed, moving along the efficient frontier can help achieve a riskier or more conservative portfolio. To increase risk, consider increasing exposure to high-growth assets; to reduce risk, allocate more to bonds or cash. Focusing on diversification and correlation is key to optimizing the portfolio for better risk-adjusted returns.

Dividends Info

  • Microsoft Corporation 0.50%
  • Invesco QQQ Trust 0.60%
  • SPDR S&P 500 ETF Trust 1.20%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.20%
  • Weighted yield (per year) 0.50%

The portfolio's dividend yield is relatively low, at 0.5%, with contributions from Microsoft Corporation, Invesco QQQ Trust, SPDR S&P 500 ETF Trust, and Vanguard Total Stock Market Index Fund ETF Shares. While dividend income is not a primary focus for this growth-oriented portfolio, it can still provide a steady income stream. Investors seeking higher income may consider including more dividend-paying stocks or funds. Balancing growth and income can help achieve a more comprehensive investment strategy that meets both capital appreciation and income needs.

Ongoing product costs Info

  • Invesco QQQ Trust 0.20%
  • SPDR S&P 500 ETF Trust 0.10%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Weighted costs total (per year) 0.02%

The portfolio's costs are reasonably low, with a total expense ratio (TER) of 0.02%. The ETFs included have varying expense ratios, with Invesco QQQ Trust at 0.2%, SPDR S&P 500 ETF Trust at 0.1%, and Vanguard Total Stock Market Index Fund ETF Shares at 0.03%. Keeping investment costs low is crucial for maximizing returns over time. While the current costs are manageable, it's important to continually monitor them and look for opportunities to reduce expenses further. Ensuring cost efficiency can significantly enhance the portfolio's overall performance.

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