A growth-focused portfolio with heavy tech exposure and low diversification
Risk profile
- Secure Speculative
The risk profile, derived from past market volatility, reflects the level of risk the portfolio is exposed to. This assessment helps align your investments with your financial goals and comfort with market fluctuations.
Diversification profile
- Focused Diversified
The diversification assessment evaluates the spread of investments across asset classes, regions, and sectors. This ensures a balanced mix, reducing risk and maximizing returns by not concentrating in any single area.
What type of investor this portfolio is suitable for
Growth Investors
This portfolio suits an investor seeking high growth with a corresponding high risk tolerance and a long-term investment horizon. It's tailored for individuals comfortable with market fluctuations and sector-specific risks, particularly within the technology sector. This investor likely prioritizes capital appreciation over income and is prepared to withstand periods of significant volatility to achieve substantial long-term gains.
Positions
-
Invesco QQQ Trust
QQQ - US46090E1038 50.00% -
SPDR S&P 500 ETF Trust
SPY - US78462F1030 50.00%
The portfolio is equally divided between two ETFs: the Invesco QQQ Trust and the SPDR S&P 500 ETF Trust, concentrating 100% in stocks. This allocation suggests a strong emphasis on growth, given the QQQ's tech-heavy composition. However, it also indicates low diversification, as both ETFs primarily invest in large-cap US equities, with a notable overlap in holdings. The lack of asset class and geographic diversity could expose the portfolio to higher volatility and sector-specific risks.
Growth
Historically, this portfolio has shown a Compound Annual Growth Rate (CAGR) of 17.48%, with a maximum drawdown of -30.64%. These figures highlight the portfolio's growth orientation but also underscore its vulnerability to significant market corrections. The days contributing to 90% of returns being limited to 38 suggest that the portfolio's performance is prone to sharp, concentrated movements, typical of growth-focused investments in technology and large-cap stocks.
Projection
Using Monte Carlo simulations, which project future outcomes based on historical data, the portfolio shows a wide range of potential future values. These simulations predict an average annualized return of 19.21%, with a 50th percentile outcome of 805.6% growth. However, it's crucial to remember that these projections are hypothetical and subject to the limitations of past performance data, which may not accurately predict future results.
Asset classes
- Stocks 100%
- Cash 0%
The portfolio's asset allocation is entirely in stocks, with no presence in other asset classes like bonds or real estate. This singular focus enhances growth potential but also increases risk, particularly in market downturns. Diversifying across different asset classes can provide a buffer against stock market volatility and contribute to more stable long-term returns.
Sectors
- Technology 46%
- Telecommunications 13%
- Consumer Discretionary 12%
- Health Care 7%
- Financials 7%
- Industrials 5%
- Consumer Staples 5%
- Utilities 2%
- Energy 2%
- Basic Materials 1%
- Real Estate 1%
The sector allocation heavily favors technology at 46%, followed by communication services and consumer cyclicals. This concentration in high-growth sectors can lead to significant returns during bull markets but may also result in higher volatility and drawdowns during market corrections. Diversifying across a broader range of sectors could mitigate some of this risk.
Regions
- North America 99%
- Europe Developed 1%
- Latin America 0%
- Asia Emerging 0%
With 99% of assets allocated in North America, the portfolio's geographic exposure is highly concentrated. This focus on developed markets, particularly the US, has historically provided strong growth opportunities but also entails significant geographic risk. Expanding into international markets, including developed Europe and emerging markets, could enhance diversification and potentially tap into new growth avenues.
Market capitalization
- Mega-cap 49%
- Large-cap 35%
- Mid-cap 15%
- Small-cap 1%
The portfolio's market capitalization exposure is skewed towards mega (49%) and big (35%) cap stocks, with minimal allocation to medium and small caps. This bias towards larger companies is typical for growth-oriented portfolios seeking stability and proven performance. However, incorporating a broader mix of market caps could improve diversification and access to growth in other segments.
Dividends
- Invesco QQQ Trust 0.50%
- SPDR S&P 500 ETF Trust 1.10%
- Weighted yield (per year) 0.80%
The portfolio's dividend yield averages to 0.80%, reflecting a moderate income component. While growth is the primary focus, dividends contribute to total returns and can provide a steady income stream, which is particularly valuable during market volatility. Considering higher-yielding investments could balance growth with income, enhancing overall portfolio performance.
Ongoing product costs
- Invesco QQQ Trust 0.20%
- SPDR S&P 500 ETF Trust 0.10%
- Weighted costs total (per year) 0.15%
The total expense ratio (TER) of 0.15% is relatively low, which is beneficial for long-term growth as it minimizes the drag on performance. Keeping costs low is crucial for maximizing returns, especially in a growth-focused portfolio where compound growth plays a significant role.
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.
The current portfolio is positioned on the growth end of the Efficient Frontier, indicating a focus on maximizing returns at the expense of higher volatility. While this may be suitable for investors with a high risk tolerance, there's room to optimize the risk-return ratio by diversifying across more asset classes and geographies, potentially moving the portfolio towards a more efficient point on the Frontier.
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