A concentrated portfolio with heavy consumer focus and limited geographic diversification

Report created on Jan 1, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

1/5
Single-Focused
Less diversification More diversification

Positions

This portfolio is heavily concentrated in a few stocks, with Starbucks Corporation alone making up over a third of the total allocation. Such concentration increases exposure to company-specific risks. A more diversified allocation typically includes a mix of stocks, bonds, and funds to balance risk and return. Compared to common benchmarks, this portfolio lacks diversification across asset classes and securities. To mitigate risk, consider spreading investments across more companies or asset types, ensuring no single position dominates the portfolio.

Growth Info

The portfolio has achieved a Compound Annual Growth Rate (CAGR) of 6.87%, which is a measure of investment growth over time. The maximum drawdown of -20.02% indicates the largest peak-to-trough decline, showcasing potential volatility. While past performance shows moderate growth, it's essential to remember that historical performance doesn't guarantee future results. Comparing this to relevant benchmarks can help assess if the portfolio is meeting expectations. Regularly reviewing performance can ensure alignment with financial goals.

Projection Info

Monte Carlo simulation, a statistical method using historical data to predict future outcomes, suggests a wide range of potential returns. The median (50th percentile) projection shows a 19.47% increase, while the 5th percentile indicates possible significant losses. While 561 out of 1,000 simulations resulted in positive returns, the inherent uncertainty highlights the importance of diversification. Remember, these projections are not guarantees but scenarios to guide risk management. Diversifying investments can potentially reduce the likelihood of extreme negative outcomes.

Asset classes Info

  • Stocks
    89%
  • Bonds
    9%
  • No data
    2%

The portfolio is primarily composed of stocks (88.69%), with minimal exposure to bonds and cash. This heavy stock allocation can lead to higher volatility, as stocks are generally more susceptible to market fluctuations. A more balanced allocation might include a greater proportion of bonds, which can provide stability and income. Comparing this to typical balanced portfolios, which often have a more even split between stocks and bonds, suggests a need to consider rebalancing for improved risk management and diversification.

Sectors Info

  • Consumer Discretionary
    41%
  • Industrials
    27%
  • Consumer Staples
    16%
  • Health Care
    6%
  • Energy
    3%
  • Utilities
    3%
  • Technology
    1%
  • Financials
    1%
  • Basic Materials
    1%
  • Consumer Discretionary
    1%
  • Telecommunications
    1%

Consumer Cyclicals dominate the sector allocation at 40.88%, followed by Industrials and Consumer Defensive. This concentration could expose the portfolio to sector-specific risks, especially during economic downturns when consumer spending declines. Comparing this to a more evenly distributed sector allocation suggests a need to diversify across other sectors like Technology or Healthcare. Balancing sector exposure can help mitigate risks associated with economic cycles and provide opportunities for growth across various market conditions.

Regions Info

  • North America
    98%
  • Europe Developed
    2%

The portfolio is overwhelmingly concentrated in North America, with 97.97% of assets based there. This limited geographic diversification can increase vulnerability to regional economic downturns. A more globally diversified portfolio would include greater exposure to other regions like Europe, Asia, or emerging markets. By expanding geographic exposure, the portfolio can benefit from growth opportunities in different economies and reduce the risk associated with 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 can be optimized for a better risk-return ratio using the Efficient Frontier, a concept in finance that identifies the best possible risk-return balance. The current portfolio could be adjusted to achieve a higher expected return of 17.56% with a similar risk level. This involves reallocating existing assets rather than adding new ones. Remember, optimization focuses on maximizing returns for a given risk level, not necessarily improving diversification or other factors.

Dividends Info

  • Carrier Global Corp 0.80%
  • FRANKLIN INCOME FUND CLASS A 5.60%
  • Altria Group 5.70%
  • Merck & Company Inc 2.30%
  • Organon & Co 7.50%
  • Otis Worldwide Corp 1.60%
  • Philip Morris International Inc 3.30%
  • Raytheon Technologies Corp 2.10%
  • Starbucks Corporation 2.50%
  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • Weighted yield (per year) 2.82%

The portfolio's dividend yield is 2.82%, with contributions from stocks like Altria Group and Organon & Co. Dividends can provide a steady income stream, which is beneficial for investors seeking regular cash flow. However, relying heavily on dividend stocks may limit growth potential. Balancing between dividend and growth stocks can offer both income and capital appreciation. Reviewing the role of dividends in the portfolio can ensure alignment with income and growth objectives.

Ongoing product costs Info

  • FRANKLIN INCOME FUND CLASS A 0.61%
  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • Weighted costs total (per year) 0.09%

The total expense ratio (TER) of 0.09% is impressively low, largely due to the low-cost Schwab U.S. Large-Cap Growth ETF. Lower costs can significantly enhance long-term returns by minimizing the drag on performance. Continually reviewing and managing costs is essential for optimizing portfolio efficiency. Consider evaluating other high-fee assets for potential replacements with lower-cost alternatives, ensuring that expenses remain aligned with investment goals.

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