High-risk concentrated portfolio with major technology focus and limited geographic diversification

Report created on Dec 15, 2024

Risk profile Info

5/7
Growth
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Diversification profile Info

2/5
Low Diversity
← Less diversification More diversification →

Positions

This portfolio is heavily concentrated with 95% allocated to the Schwab U.S. Large-Cap Growth ETF and 5% to NVIDIA Corporation. Such concentration in a single ETF and stock can amplify both potential gains and losses. Having a large portion in one ETF means exposure to the same market trends and risks, while a small allocation to individual stock may not significantly diversify the risk. Consider diversifying across more ETFs or stocks to spread risk and capture broader market opportunities.

Growth Info

Historically, the portfolio has shown strong performance with a compound annual growth rate (CAGR) of 20.44%. However, it's important to note the high maximum drawdown of -50.41%, indicating significant volatility. While past performance can provide insights, it is not a guarantee of future results. Investors should be prepared for potential downturns and consider strategies to mitigate risk, such as setting stop-loss orders or diversifying investments.

Projection Info

Monte Carlo simulations, which use historical data to project future outcomes, show a wide range of potential returns. The median projection suggests significant growth, but the wide spread highlights the uncertainty and risk involved. While simulations provide a statistical look at possible outcomes, they cannot account for future market changes or black swan events. Investors should use these projections as a guide but remain flexible and ready to adjust their strategies as market conditions change.

Asset classes Info

  • Stocks
    100%

The portfolio is predominantly composed of stocks, with a negligible cash position. This high exposure to equities aligns with a growth-focused strategy but increases vulnerability to market volatility. Diversifying into other asset classes such as bonds, real estate, or commodities could help reduce risk and provide more stable returns. Balancing asset classes can help cushion against market downturns, offering a more consistent performance over time.

Sectors Info

  • Technology
    51%
  • Consumer Discretionary
    12%
  • Telecommunications
    12%
  • Health Care
    10%
  • Financials
    7%
  • Industrials
    3%
  • Consumer Staples
    2%
  • Basic Materials
    2%
  • Energy
    1%
  • Utilities
    1%
  • Real Estate
    1%

With over half of the portfolio concentrated in technology, it is heavily reliant on the performance of this sector. While technology has been a strong performer, sector-specific risks like regulatory changes or tech bubbles can impact returns. Diversifying into other sectors can help mitigate these risks. Consider reallocating some funds into sectors like healthcare or consumer staples, which may offer more stability and less correlation with tech.

Regions Info

  • North America
    100%

The portfolio is almost entirely concentrated in North American assets, with minimal exposure to Europe. Such geographic concentration can increase vulnerability to regional economic downturns or political changes. Expanding geographic exposure could provide diversification benefits and access to growth opportunities in other regions. Consider adding international ETFs or stocks to capture potential growth in emerging markets or other developed economies.

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 currently sits on a high-risk point on the Efficient Frontier, indicating potential for optimization. By reallocating funds among existing assets, it's possible to achieve a better risk-return balance. This involves finding a combination that offers the highest expected return for a given level of risk. Exploring other assets and adjusting allocations could help move the portfolio to a more efficient point, enhancing performance without increasing risk.

Dividends Info

  • Schwab U.S. Large-Cap Growth ETF 0.30%
  • Weighted yield (per year) 0.28%

The portfolio's dividend yield is relatively low at 0.28%, reflecting its growth orientation. While dividends can provide a steady income stream, this portfolio prioritizes capital appreciation over income. Investors seeking income might consider reallocating some funds into dividend-paying stocks or ETFs. This could enhance returns through dividends, providing a cushion during market downturns and contributing to total return.

Ongoing product costs Info

  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • Weighted costs total (per year) 0.04%

The portfolio benefits from low costs, with an expense ratio of 0.04% for the Schwab U.S. Large-Cap Growth ETF. Low costs are advantageous as they allow more of the investment returns to be retained by the investor. However, it's important to weigh costs against potential returns and diversification benefits. While minimizing costs is important, ensuring a well-diversified portfolio should also be a priority to optimize long-term performance.

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