High-Risk Growth Portfolio with Strong Tech Focus and Limited Geographic and Sector Diversification

Report created on Dec 4, 2024

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

This portfolio is heavily weighted towards the Vanguard S&P 500 ETF, making up over a third of the total allocation. The rest of the portfolio is primarily composed of large-cap tech stocks like NVIDIA, Amazon, and Tesla, with minimal exposure to other sectors or smaller companies. The concentration in a few stocks and the reliance on a single ETF suggests a low level of diversification. This composition can lead to high volatility, making it important to consider the implications of such concentrated investments and the potential risks they carry.

Growth Info

Historically, this portfolio has delivered an impressive compound annual growth rate (CAGR) of 31.25%, showcasing strong performance. However, it has also experienced a significant maximum drawdown of -46.98%, indicating substantial volatility. The fact that 90% of returns are concentrated in just 39 days highlights the portfolio's dependence on short bursts of market activity for its gains. While the high returns are attractive, the volatility and reliance on specific market conditions mean that investors should be prepared for potential fluctuations in value over time.

Projection Info

Using a Monte Carlo simulation, which involves running thousands of scenarios to forecast potential outcomes, the portfolio shows a wide range of possible future performances. With a hypothetical initial investment, the 5th percentile sees a 156.84% return, while the 67th percentile could reach 5,267.42%. The annualized return across simulations is 34.28%, reflecting the portfolio's high-risk, high-reward nature. While the projections are promising, the variability underscores the importance of aligning investments with one's risk tolerance and being prepared for both ups and downs.

Asset classes Info

  • Stocks
    100%

The portfolio is overwhelmingly comprised of stocks, accounting for nearly 100% of the allocation, with a negligible amount in cash. This heavy skew towards equities indicates a high-risk, growth-focused strategy. While stocks can offer significant returns, the lack of diversification into other asset classes, such as bonds or real estate, can increase vulnerability to market downturns. To mitigate risk, it might be beneficial to explore incorporating other asset types, which can provide stability and reduce the portfolio's overall volatility.

Sectors Info

  • Technology
    45%
  • Consumer Discretionary
    22%
  • Telecommunications
    9%
  • Financials
    8%
  • Consumer Staples
    5%
  • Health Care
    4%
  • Industrials
    4%
  • Energy
    1%
  • Utilities
    1%
  • Basic Materials
    1%
  • Real Estate
    1%

Technology dominates this portfolio, making up around 44.6% of the total allocation. Consumer cyclicals and communication services follow, but with much smaller shares. This concentration in tech reflects a bet on the continued outperformance of the sector, but also exposes the portfolio to sector-specific risks. Diversifying into other sectors could help balance the portfolio and protect against downturns in the tech industry. By spreading investments across a broader range of sectors, the portfolio can achieve more stable returns and reduce susceptibility to sector-specific market shifts.

Regions Info

  • North America
    99%
  • Asia Emerging
    1%

Geographically, the portfolio is heavily concentrated in North America, with 98.6% of assets allocated there. This lack of international diversification limits exposure to global markets and potential growth opportunities abroad. While North American markets have historically performed well, relying solely on them can be risky if regional economic conditions change. By considering investments in other regions, the portfolio can benefit from global economic growth and reduce risk by not being overly dependent on a single geographic area.

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 that there is room for improvement in diversification. While the current setup is geared towards high risk and high reward, moving along the efficient frontier can help achieve a more balanced risk-return profile. By adjusting the allocation towards a mix of stocks, bonds, and possibly other asset classes, the portfolio can become either riskier or more conservative. This adjustment can help match the risk tolerance and financial goals of the investor, ensuring a more tailored investment strategy.

Dividends Info

  • Apple Inc 0.40%
  • AbbVie Inc 3.40%
  • Pacer US Small Cap Cash Cows 100 ETF 1.00%
  • Costco Wholesale Corp 2.00%
  • Alphabet Inc Class C 0.20%
  • Meta Platforms Inc. 0.20%
  • Microsoft Corporation 0.50%
  • Visa Inc. Class A 0.70%
  • Vanguard S&P 500 ETF 1.20%
  • Vertiv Holdings Co 0.10%
  • Weighted yield (per year) 0.53%

The portfolio's dividend yield is relatively low at 0.53%, reflecting its focus on growth stocks rather than income-generating investments. While dividends can provide a steady income stream, the emphasis here is clearly on capital appreciation. For investors seeking income, it may be worth considering increasing exposure to dividend-paying stocks or funds. However, for those prioritizing growth, the current allocation aligns with a strategy focused on potential capital gains rather than immediate income.

Ongoing product costs Info

  • Pacer US Small Cap Cash Cows 100 ETF 0.59%
  • WisdomTree India Earnings Fund 0.85%
  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.03%

The portfolio's costs are quite low, with the Vanguard S&P 500 ETF having a minimal expense ratio of 0.03%. However, the WisdomTree India Earnings Fund and Pacer US Small Cap Cash Cows 100 ETF have higher expense ratios of 0.85% and 0.59% respectively. Keeping investment costs low is crucial for maximizing returns over time. It may be beneficial to review these costs periodically and consider lower-cost alternatives if they align with the investment strategy. Overall, the low cost of the main ETF helps keep the portfolio's overall expenses manageable.

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