Highly concentrated portfolio with aggressive risk profile and low diversification

Report created on Apr 9, 2025

Risk profile Info

6/7
Aggressive
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

The portfolio is heavily concentrated, with 57.36% in MFA Financial Inc, indicating a significant single-stock risk. The remainder is spread across a few stocks and one ETF. Compared to a typical diversified portfolio, this structure is more vulnerable to individual stock volatility. Diversifying further by including more stocks or different asset types could reduce risk and improve stability.

Growth Info

Historical performance shows a low CAGR of 0.89% and a significant max drawdown of -45.93%. This suggests that the portfolio has struggled to generate consistent returns over time. Comparing with a benchmark, the performance is likely underwhelming. Consider reviewing the asset allocation, as past performance highlights potential risks that may not align with the desired investment goals.

Projection Info

Monte Carlo simulations, which use historical data to predict future outcomes, indicate a bleak outlook with an annualized return of -9.46%. Only a small fraction of simulations predict positive returns, highlighting the portfolio's high risk. While simulations offer a glimpse into potential futures, they rely on past data and assumptions that may not hold true. Reassessing the portfolio's concentration and risk exposure is advisable.

Asset classes Info

  • Stocks
    100%

The portfolio is entirely invested in stocks, lacking diversification across asset classes. This mono-asset approach can increase volatility and risk, especially during market downturns. A more diversified asset allocation, including bonds or other asset types, could provide a buffer against market fluctuations and improve the risk-return profile.

Sectors Info

  • Real Estate
    58%
  • Technology
    12%
  • Consumer Discretionary
    11%
  • Financials
    5%
  • Health Care
    4%
  • Industrials
    3%
  • Consumer Staples
    2%
  • Energy
    2%
  • Utilities
    1%
  • Telecommunications
    1%
  • Basic Materials
    1%

Sector allocation reveals a heavy concentration in real estate at 58%, which could expose the portfolio to sector-specific risks. Other sectors like technology and consumer cyclicals have modest representation. Aligning sector weights more closely with a benchmark could enhance diversification and reduce sector-specific volatility, potentially leading to more stable returns.

Regions Info

  • North America
    100%

With 100% exposure to North America, the portfolio lacks geographic diversification. This concentration can heighten vulnerability to regional economic downturns. Expanding into international markets, including Europe and Asia, could provide broader exposure to global opportunities and mitigate regional risks, potentially enhancing the portfolio's resilience.

Market capitalization Info

  • Small-cap
    65%
  • Large-cap
    21%
  • Mid-cap
    7%
  • Mega-cap
    5%
  • Micro-cap
    2%

The portfolio leans heavily towards small-cap stocks, with 65% in this category. While small caps can offer growth potential, they also come with higher volatility. Balancing the allocation with more mid and large-cap stocks could stabilize returns and reduce risk. This adjustment could align the portfolio more closely with a diversified benchmark.

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.

Portfolio optimization suggests a more efficient allocation could achieve a 9.27% expected return at a similar risk level. The current portfolio's risk-return balance is suboptimal. Adjusting the asset mix to align with the Efficient Frontier could enhance returns without increasing risk. This involves reallocating existing assets rather than adding new ones.

Dividends Info

  • MFA Financial Inc 12.30%
  • Vanguard Value Index Fund ETF Shares 1.90%
  • Weighted yield (per year) 7.49%

With a total yield of 7.49%, dividends contribute meaningfully to returns, particularly from MFA Financial Inc. High dividends can provide income and cushion against market volatility. However, relying heavily on a single high-yield stock can increase risk. Diversifying dividend sources could improve income stability and reduce reliance on one stock.

Ongoing product costs Info

  • Vanguard Value Index Fund ETF Shares 0.04%
  • Weighted costs total (per year) 0.01%

The portfolio's costs are impressively low, with a total expense ratio (TER) of 0.01%. This efficient cost structure supports better long-term performance by minimizing the drag on returns. Maintaining low costs is a positive aspect and should remain a focus when considering any portfolio adjustments or additions.

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