A growth-oriented portfolio with significant concentration in consumer cyclicals and real estate

Report created on Jan 4, 2025

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

The portfolio is heavily weighted in common stocks, making up almost 100% of its composition, with minimal cash holdings. This high allocation to equities aligns with a growth-focused strategy, typically seeking higher returns at the cost of increased volatility. Compared to typical diversified portfolios, this one lacks balance, as it is concentrated in a few stocks. To improve diversification, consider adding more asset classes like bonds or international equities, which can help mitigate risks associated with stock market fluctuations.

Growth Info

The portfolio has shown impressive historical performance with a Compound Annual Growth Rate (CAGR) of 31.98%. However, it also experienced a significant max drawdown of nearly 60%, indicating high volatility. While past performance is not indicative of future results, this historical data highlights the potential for substantial gains alongside significant risks. To manage this volatility, consider incorporating assets with lower historical drawdowns or employing strategies that can hedge against downturns.

Projection Info

Monte Carlo simulations, which use historical data to project future outcomes, suggest a wide range of potential returns. The median (50th percentile) projection indicates substantial growth, while the 5th percentile shows a much lower outcome. Although 968 out of 1,000 simulations showed positive returns, keep in mind that these projections aren't guarantees. Consider stress-testing the portfolio under different economic scenarios to better understand potential risks and returns.

Asset classes Info

  • Stocks
    100%

The portfolio is overwhelmingly concentrated in stocks, with negligible cash holdings. This lack of asset class diversification could amplify risk, especially during market downturns. Diversification across asset classes can reduce risk and improve stability. Consider incorporating bonds or other fixed-income securities, which typically offer lower returns but can provide a cushion during volatile periods.

Sectors Info

  • Consumer Discretionary
    41%
  • Real Estate
    31%
  • Telecommunications
    10%
  • Technology
    9%
  • Consumer Staples
    7%

The portfolio is heavily weighted in consumer cyclicals and real estate, comprising over 70% of the total allocation. This concentration could lead to increased volatility, particularly during economic downturns affecting these sectors. While sector concentration can drive returns when these industries perform well, it also increases risk. To reduce sector-specific risks, consider reallocating some investments into underrepresented sectors like healthcare or technology.

Regions Info

  • North America
    100%

Geographically, the portfolio is almost entirely focused on North America, with negligible exposure to other regions. This lack of geographic diversification could increase vulnerability to local economic shifts. By expanding exposure to international markets, you can tap into growth opportunities and reduce region-specific risks. Consider adding investments in emerging markets or developed regions outside North America to enhance diversification.

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 potentially be optimized using the Efficient Frontier, which suggests the best risk-return trade-off for a given set of assets. This involves adjusting the weights of current holdings to achieve the highest possible return for a given level of risk. While this optimization focuses on maximizing efficiency, it doesn't account for diversification or other goals. Consider using this analysis to refine asset allocation, balancing risk and return more effectively.

Dividends Info

  • Arbor Realty Trust 12.30%
  • Ellington Financial LLC 11.90%
  • Altria Group 5.60%
  • Rithm Capital Corp. 6.70%
  • Schwab U.S. Dividend Equity ETF 3.60%
  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • AT&T Inc 4.90%
  • Weighted yield (per year) 4.48%

The portfolio's average dividend yield is 4.48%, with contributions from high-yield stocks like Arbor Realty Trust and Ellington Financial LLC. Dividends can provide a steady income stream, which is beneficial for reinvestment or income generation. However, relying heavily on dividends might limit growth potential. Ensure that the dividend strategy aligns with your overall investment goals, and consider balancing high-yield stocks with growth-oriented ones.

Ongoing product costs Info

  • Schwab U.S. Dividend Equity ETF 0.06%
  • Schwab U.S. Large-Cap Growth ETF 0.04%

The portfolio includes low-cost ETFs, with expense ratios of 0.06% and 0.04%, which is beneficial for long-term performance as lower costs mean more returns are retained. While these costs are minimal, ensure that other aspects of the portfolio, such as trading fees and management costs, are also optimized. Regularly review costs to ensure they remain competitive, as reducing expenses can significantly enhance returns over time.

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