Growth-Focused Portfolio with Moderate Diversification and High Risk-Reward Potential

Report created on Dec 3, 2024

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

The portfolio is heavily weighted towards the Vanguard S&P 500 ETF, making up 80% of the total allocation. This indicates a strong preference for large-cap U.S. equities. The remaining 20% is split between technology-focused assets, including MicroStrategy Incorporated, Invesco NASDAQ 100 ETF, ProShares UltraPro QQQ, and Taiwan Semiconductor Manufacturing. This composition suggests a growth-oriented strategy, leaning heavily on the tech sector. While this can offer significant upside potential, it also exposes the portfolio to sector-specific risks. Diversification could be improved by considering additional sectors or asset classes to balance the tech-heavy allocation.

Growth Info

With a historical CAGR of 23.28%, the portfolio has demonstrated impressive growth over time. However, the max drawdown of -36.6% highlights the potential for significant volatility. The concentration in high-growth tech stocks can lead to substantial gains during market upswings, but it also increases vulnerability during downturns. Despite this volatility, the portfolio's returns are concentrated in a small number of trading days, indicating the importance of maintaining a long-term perspective. To mitigate risk, consider strategies to smooth out returns and protect against large drawdowns.

Projection Info

The Monte Carlo simulation, which uses random sampling to predict future returns, shows a wide range of potential outcomes for a hypothetical initial investment. With an annualized return of 53.76% across simulations, the portfolio has the potential for significant growth. However, the variance in outcomes underscores the inherent risk. The 5th percentile projection of 116.7% indicates a lower bound, while the 67th percentile at 14,260.74% shows an optimistic scenario. This highlights the importance of aligning the portfolio with one's risk tolerance and financial goals, while considering potential adjustments for volatility management.

Asset classes Info

  • Stocks
    98%
  • Cash
    2%

The portfolio is predominantly composed of stocks, accounting for over 98% of the allocation. This high concentration in equities suggests a focus on capital appreciation, which aligns with a growth-oriented investment strategy. The minimal presence of bonds and cash indicates limited diversification across asset classes. While this equity-heavy approach can offer substantial returns, it also increases exposure to market fluctuations. To reduce risk and enhance stability, consider incorporating a more balanced mix of asset classes, such as fixed income or alternative investments, to achieve a more diversified risk-return profile.

Sectors Info

  • Technology
    42%
  • Financials
    10%
  • Consumer Discretionary
    10%
  • Health Care
    9%
  • Telecommunications
    9%
  • Industrials
    6%
  • Consumer Staples
    5%
  • Energy
    3%
  • Utilities
    2%
  • Real Estate
    2%
  • Basic Materials
    2%

The portfolio's sector allocation is heavily skewed towards technology, comprising over 41% of the total. This reflects a strong emphasis on tech-driven growth, which can lead to significant capital appreciation. However, the concentration in this single sector introduces sector-specific risks, such as regulatory changes or technological disruptions. Other sectors like financial services, consumer cyclicals, and healthcare provide some diversification, but their impact is limited. To mitigate sector risk, consider expanding exposure to underrepresented sectors, which can provide a buffer against volatility and enhance the portfolio's resilience.

Regions Info

  • North America
    94%
  • Asia Emerging
    5%
  • Europe Developed
    1%

Geographically, the portfolio is overwhelmingly concentrated in North America, with 94% of assets allocated to this region. This focus on U.S. markets aligns with the strong presence of large-cap equities in the portfolio. While this can capitalize on the growth potential of the U.S. economy, it also exposes the portfolio to regional risks, such as economic downturns or policy changes. The limited exposure to Asia and Europe suggests potential opportunities for geographic diversification. Expanding into other regions could help capture growth opportunities and reduce reliance on the U.S. market.

Redundant positions Info

  • ProShares UltraPro QQQ
    Invesco NASDAQ 100 ETF
    High correlation

The portfolio exhibits significant asset correlation, particularly between the ProShares UltraPro QQQ and Invesco NASDAQ 100 ETF. This high correlation indicates that these assets tend to move in tandem, reducing the diversification benefits they provide. While this can amplify returns during market rallies, it also increases vulnerability during downturns. To enhance diversification, consider replacing highly correlated assets with alternatives that have lower correlation, thereby spreading risk across different market conditions. This approach can help stabilize returns and reduce the impact of adverse market movements.

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, it's crucial to address the overlapping assets that offer no diversification benefits. By focusing on reducing these high correlations, the portfolio can achieve a more balanced risk-return profile. Once this is addressed, investors can explore moving along the efficient frontier to adjust their risk level. For a riskier portfolio, consider increasing exposure to high-growth sectors, while a more conservative approach might involve adding more fixed-income securities. This strategic adjustment can enhance the portfolio's overall performance and align it with the investor's risk appetite.

Dividends Info

  • Invesco NASDAQ 100 ETF 0.60%
  • ProShares UltraPro QQQ 1.20%
  • Taiwan Semiconductor Manufacturing 1.10%
  • Vanguard S&P 500 ETF 1.20%
  • Weighted yield (per year) 1.10%

The portfolio's dividend yield is relatively low at 1.1%, reflecting its growth-oriented focus. The individual components, such as the Vanguard S&P 500 ETF and Taiwan Semiconductor Manufacturing, contribute modestly to the overall yield. While dividends can provide a steady income stream and reduce reliance on capital gains, the portfolio's emphasis on growth stocks limits this benefit. For investors seeking income, incorporating higher-yielding assets could enhance cash flow. However, the primary goal here appears to be capital appreciation, so dividend income may not be a priority.

Ongoing product costs Info

  • Invesco NASDAQ 100 ETF 0.15%
  • ProShares UltraPro QQQ 0.88%
  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.08%

The portfolio's total expense ratio is low at 0.08%, indicating cost-efficient management. The Vanguard S&P 500 ETF, with an expense ratio of 0.03%, contributes significantly to this efficiency. However, the ProShares UltraPro QQQ has a higher expense ratio of 0.88%, which could impact overall returns if not managed carefully. Keeping costs low is crucial for maximizing net returns, especially in a growth-oriented portfolio. Consider reviewing high-cost components to ensure they align with performance expectations and contribute positively to the portfolio's long-term objectives.

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