A concentrated growth-focused portfolio with high exposure to consumer defensive stocks

Report created on Jan 1, 2025

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 concentrated in a few common stocks, with Altria Group and Philip Morris International making up over 50% of the total. Such concentration can lead to higher risk as the portfolio's performance heavily depends on the success of these two companies. Typically, a well-diversified portfolio might include a broader mix of stocks, bonds, and other asset classes. To reduce risk, consider diversifying by adding more varied asset types or increasing the number of holdings to spread exposure across different sectors and companies.

Growth Info

Historically, the portfolio has shown a strong Compound Annual Growth Rate (CAGR) of 11.71%, suggesting solid past performance. However, it also experienced a significant maximum drawdown of -35.72%, indicating vulnerability to market downturns. Comparing this to benchmark indices can provide context; for instance, the S&P 500 has a long-term average CAGR of around 10%. It's important to remember that past performance does not guarantee future results. To mitigate potential losses, consider strategies such as diversification or risk management techniques.

Projection Info

The Monte Carlo simulation projects potential future outcomes based on historical data, showing a wide range of possible returns. With a median projection of 356.92% and a high number of simulations yielding positive returns, the outlook appears optimistic. However, the 5th percentile indicates potential losses of -16.17%, emphasizing the uncertainty inherent in projections. It's crucial to understand that these simulations are based on past data and assumptions, which may not fully capture future market conditions. Regularly reviewing and adjusting the portfolio can help manage risks.

Asset classes Info

  • Stocks
    100%

The portfolio is almost entirely composed of stocks, with a negligible cash position. This high allocation to equities suggests an aggressive stance, aiming for higher returns at the cost of increased volatility. Compared to a more balanced allocation that includes bonds or real estate, this portfolio may experience larger swings in value. To align with common diversification practices, consider introducing other asset classes to reduce risk and smooth returns. This approach can help protect against market downturns and provide more stable growth.

Sectors Info

  • Consumer Staples
    51%
  • Industrials
    24%
  • Health Care
    13%
  • Technology
    6%
  • Consumer Discretionary
    2%
  • Telecommunications
    2%
  • Financials
    1%

The portfolio's sector allocation is heavily tilted towards consumer defensive stocks, comprising over half of the total holdings. While this can offer stability during economic downturns, it may limit growth potential in booming markets. The lack of significant exposure to sectors like technology or financial services, which often drive growth, could be a missed opportunity. To enhance sector balance, consider reallocating some investments towards underrepresented areas. This can help capture growth across different economic cycles and improve overall portfolio resilience.

Regions Info

  • North America
    100%

Geographically, the portfolio is predominantly focused on North America, with minimal exposure to Europe. This concentration could leave the portfolio vulnerable to regional economic downturns or geopolitical events. Typically, global diversification helps mitigate such risks by spreading investments across various economies. To achieve better geographic balance, consider adding international stocks or funds. This can provide exposure to growth opportunities in emerging markets and reduce dependency on any single region's economic performance.

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 could benefit from optimization on the Efficient Frontier, which suggests a more efficient portfolio could achieve a higher expected return of 23.27% at the same risk level. This optimization involves reallocating existing assets to maximize returns for a given level of risk. It's important to note that such optimization is based on current holdings and their historical performance, which may not predict future outcomes. Regularly revisiting the portfolio's allocation can help ensure it remains aligned with your risk-return preferences.

Dividends Info

  • Altria Group 5.70%
  • Merck & Company Inc 2.30%
  • Philip Morris International Inc 3.30%
  • Raytheon Technologies Corp 2.10%
  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • Weighted yield (per year) 2.81%

The portfolio's dividend yield stands at 2.81%, primarily driven by Altria Group and Philip Morris International. Dividends can provide a steady income stream, which is particularly valuable during volatile markets. However, focusing too heavily on dividend-paying stocks might limit growth potential. Balancing dividend yield with growth-oriented investments can optimize returns while still benefiting from income. Consider reviewing the role of dividends in your investment strategy and adjusting allocations to align with your financial goals and risk tolerance.

Ongoing product costs Info

  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • Weighted costs total (per year) 0.01%

The portfolio's costs are impressively low, with the Schwab U.S. Large-Cap Growth ETF carrying an expense ratio of just 0.04% and a total TER of 0.01%. Low costs are beneficial as they enhance net returns over time, allowing more of your investment gains to compound. While the current cost structure is efficient, it's always wise to periodically review fees to ensure they remain competitive. Consider exploring other low-cost investment options that maintain or improve the portfolio's cost-effectiveness without sacrificing performance.

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