Moderate Risk Growth Portfolio with Low Diversification and High Potential Returns

Report created on Dec 2, 2024

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 towards stocks, with a striking 99.74% allocation in equities, and a minimal presence in cash and bonds. This composition indicates a high-risk, high-reward strategy, relying heavily on the performance of individual companies. The portfolio includes a mix of technology, industrials, and consumer defensive stocks, but lacks significant diversification across different asset classes. To mitigate risk, consider introducing more asset classes such as bonds or alternative investments, which can provide stability and reduce volatility during market downturns.

Growth Info

Historically, the portfolio has shown impressive performance with a compound annual growth rate (CAGR) of 45.22%, albeit with a significant maximum drawdown of -40.75%. This indicates that while the portfolio has the potential for high returns, it is also susceptible to large losses. Such volatility is typical of a growth-focused strategy. The portfolio's reliance on a few high-performing days for the majority of returns suggests a need for balance. Adding more stable investments could help smooth out performance and reduce reliance on short-term market movements.

Projection Info

Using a Monte Carlo simulation with a hypothetical initial investment, the portfolio shows a wide range of potential outcomes. The 5th percentile projects a return of 188.5%, while the median is a staggering 3,299.96%, and the 67th percentile reaches 6,437.7%. This simulation indicates a high probability of positive returns, with 998 out of 1,000 simulations yielding gains. The annualized return across all simulations is 37.72%. While promising, these projections highlight the need to prepare for variability. A well-balanced approach could help manage expectations and provide more consistent results.

Asset classes Info

  • Stocks
    100%

The portfolio is overwhelmingly concentrated in stocks, leaving it vulnerable to equity market fluctuations. With only a negligible presence in cash and bonds, there is limited protection against market downturns. This lack of diversification across asset classes could pose a risk if stock markets experience prolonged declines. Diversifying into other asset classes such as fixed income or real assets could provide a buffer and enhance the portfolio's resilience. Such diversification can also help achieve a more balanced risk-return profile, aligning with long-term financial goals.

Sectors Info

  • Technology
    44%
  • Industrials
    19%
  • Consumer Staples
    15%
  • Utilities
    7%
  • Telecommunications
    7%
  • Financials
    2%
  • Consumer Discretionary
    2%
  • Health Care
    2%
  • Energy
    2%

The portfolio is heavily skewed towards technology, representing over 44% of the total allocation. While technology has been a strong performer in recent years, this concentration exposes the portfolio to sector-specific risks. Other sectors like industrials and consumer defensive are also present, but in smaller proportions. To reduce sector risk, consider diversifying into sectors that may perform well in different economic environments. A more balanced sector allocation can help mitigate the impact of sector volatility, ensuring the portfolio is not overly reliant on the performance of a single industry.

Regions Info

  • North America
    98%
  • No data
    1%
  • Europe Developed
    1%

Geographically, the portfolio is predominantly focused on North America, with 98.46% of assets allocated in this region. This lack of international diversification means the portfolio is highly dependent on the economic and political climate of a single region. Expanding geographical exposure could help mitigate regional risks and take advantage of growth opportunities in other markets. Introducing investments from Europe, Asia, or emerging markets could provide diversification benefits and reduce the portfolio's sensitivity to North American market fluctuations.

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's optimization analysis suggests opportunities to enhance diversification and manage risk. Moving along the efficient frontier can help achieve a more balanced risk-return profile. For those seeking higher returns, increasing exposure to growth stocks can be effective, while a more conservative approach might involve adding bonds or defensive stocks. Prioritizing diversification across asset classes and geographies can also optimize performance. By focusing on reducing sector and regional concentration, investors can enhance resilience and align the portfolio more closely with their risk appetite and financial goals.

Dividends Info

  • Amcor PLC 3.60%
  • Caterpillar Inc 1.30%
  • Constellation Energy Corp 0.40%
  • Costco Wholesale Corp 2.00%
  • FLEX LNG Ltd 9.50%
  • Alphabet Inc Class C 0.20%
  • Intel Corporation 1.50%
  • Kraft Heinz Co 3.80%
  • The Coca-Cola Company 2.30%
  • Schwab U.S. Broad Market ETF 1.20%
  • SHP ETF Trust - NEOS S&P 500 High Income ETF 11.60%
  • Weighted yield (per year) 2.29%

The portfolio's dividend yield stands at 2.29%, with contributions from various stocks like SHP ETF Trust - NEOS S&P 500 High Income ETF and FLEX LNG Ltd providing higher yields. While dividends can offer a steady income stream, the portfolio's focus on growth stocks often means lower dividend payouts. To enhance income potential, consider increasing exposure to dividend-paying stocks or ETFs. This can provide a reliable income stream, especially in volatile markets, and contribute to total returns over time. Balancing growth and income can align with long-term investment objectives.

Ongoing product costs Info

  • Schwab U.S. Broad Market ETF 0.03%
  • SHP ETF Trust - NEOS S&P 500 High Income ETF 0.68%
  • Weighted costs total (per year) 0.09%

Portfolio costs are relatively low, with a total expense ratio (TER) of 0.09%. This is primarily driven by the Schwab U.S. Broad Market ETF's minimal cost of 0.03%. Keeping costs low is crucial for maximizing net returns, particularly in a growth-oriented portfolio. High fees can erode returns over time, so maintaining a focus on cost-efficient investments is wise. Regularly reviewing and optimizing costs can ensure that the portfolio remains competitive. Consider low-cost ETFs or index funds to maintain a cost-effective approach while achieving diversification and growth.

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