A highly concentrated growth-focused portfolio with significant reliance on consumer defensive stocks

Report created on Dec 7, 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 predominantly composed of common stocks, with a striking 81.54% allocation in Costco Wholesale Corp. The rest is spread across Alphabet Inc, Apple Inc, Datadog Inc, Microsoft Corporation, and ASML Holding NV. Such a heavy concentration in one stock suggests a high level of risk, as the portfolio's performance is largely tied to the fortunes of Costco. Diversification is minimal, which may not align with a balanced risk strategy. It would be wise to consider redistributing some of the assets to achieve a more balanced exposure across different companies and industries, thereby reducing dependency on a single stock.

Growth Info

Historically, this portfolio has shown a strong compound annual growth rate (CAGR) of 28.66%, indicating robust past performance. However, it has also experienced a significant maximum drawdown of -29.24%, highlighting potential volatility. This means that while the portfolio has the potential for high returns, it also carries a risk of substantial losses during market downturns. Investors should weigh this historical performance against their risk tolerance and consider strategies to mitigate potential drawdowns, such as diversification or adjusting asset allocation.

Projection Info

Forward projections using Monte Carlo simulations suggest a wide range of potential outcomes, with a median return of 4,325.34%. Monte Carlo simulations use historical data to model potential future returns, but they do not guarantee outcomes. The 5th percentile projection of 242.61% indicates that even in less favorable scenarios, the portfolio could still grow substantially. However, relying solely on historical data can be misleading, as it may not account for future market changes. Investors should use these projections as a guide, not a certainty, and consider adjusting their portfolio to hedge against potential risks.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily skewed towards a single asset class—stocks—comprising nearly 100% of the allocation. This lack of diversity in asset classes can expose the investor to heightened market risk, as all investments are subject to the same market forces. To enhance diversification and potentially reduce risk, consider adding different asset classes such as bonds, real estate, or commodities. This can help balance the portfolio, providing stability during periods of stock market volatility and potentially improving the overall risk-adjusted return.

Sectors Info

  • Consumer Staples
    82%
  • Telecommunications
    14%
  • Technology
    5%

The portfolio is predominantly concentrated in the consumer defensive sector, with 81.54% allocated to Costco Wholesale Corp. The remainder is divided between communication services and technology sectors. This concentration in consumer defensive stocks can provide some stability in economic downturns but may limit growth potential in booming market conditions. To mitigate sector-specific risks and capitalize on broader market opportunities, consider diversifying into other sectors such as healthcare, financials, or industrials. This could enhance the portfolio's resilience and growth potential across different economic cycles.

Regions Info

  • North America
    100%

Geographically, the portfolio is overwhelmingly focused on North America, with 99.5% of assets allocated there. This heavy regional concentration increases exposure to local economic and political risks, potentially limiting the benefits of global diversification. By expanding geographic exposure to include more international markets, such as emerging markets or additional developed regions, the portfolio could benefit from broader economic growth and reduced regional risk. This diversification can help cushion the impact of regional downturns and provide access to new growth opportunities.

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 benefit from optimization using the Efficient Frontier, which aims to achieve the best possible risk-return ratio with the current assets. By adjusting the allocation among existing stocks, the portfolio may achieve a more favorable balance between risk and return. This does not necessarily mean adding new assets but rather reallocating within the current selection to enhance efficiency. Investors should consider employing tools or consulting with a financial advisor to explore how optimization could improve their portfolio's performance while aligning with their risk tolerance and investment goals.

Dividends Info

  • Apple Inc 0.40%
  • ASML Holding NV 1.00%
  • Costco Wholesale Corp 2.00%
  • Alphabet Inc Class C 0.20%
  • Microsoft Corporation 0.50%
  • Weighted yield (per year) 1.68%

The portfolio's total dividend yield stands at 1.68%, with Costco contributing significantly at 2.0%. Dividends can provide a steady income stream and contribute to total returns, especially during periods of market volatility. However, the emphasis on growth stocks means dividend income is relatively modest. Investors seeking higher income may want to consider reallocating some assets to higher-yielding stocks or dividend-focused funds. This shift could enhance cash flow without significantly compromising the growth potential of the portfolio.

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