High concentration in financial sector with limited geographic and sector diversification

Report created on Dec 23, 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 heavily concentrated, with 58% in JPMorgan Chase & Co and the rest in two ETFs. Such concentration can lead to increased risk if the primary holding underperforms. A more balanced allocation, with a wider variety of stocks or funds, could reduce risk and improve stability. Comparing to a typical growth portfolio, which often includes a mix of stocks, bonds, and alternative assets, this portfolio lacks diversity. Diversifying across more asset types and sectors can help mitigate risks associated with single-stock volatility.

Growth Info

Historically, this portfolio has performed well, with a Compound Annual Growth Rate (CAGR) of 21.85%. While this is impressive, it's essential to remember that past performance doesn't guarantee future results. The max drawdown of -33.4% indicates significant volatility, which might concern risk-averse investors. Comparing this performance to a broader market index could provide insights into whether the returns justify the risk. Considering strategies to reduce volatility, such as diversifying holdings, may help achieve a more stable return profile.

Projection Info

The Monte Carlo simulation, which predicts future outcomes based on historical data, shows a wide range of potential returns. With 998 out of 1,000 simulations resulting in positive returns, the portfolio appears promising. However, the reliance on historical data means outcomes are not guaranteed. The 5th percentile projection of 197.19% suggests a potential downside, while the 67th percentile projection of 1,547.46% illustrates possible upside. Diversifying holdings could help narrow this range, providing a more predictable performance.

Asset classes Info

  • Stocks
    100%

The portfolio is almost entirely composed of stocks, with a negligible cash position. While stocks can offer substantial growth, they also bring higher risk. A typical growth portfolio might include a mix of asset classes such as bonds or real estate to balance risk and reward. Adding different asset classes could enhance diversification and potentially cushion against market downturns. This would align the portfolio more closely with benchmark norms, which often include a broader range of asset types.

Sectors Info

  • Financials
    62%
  • Technology
    16%
  • Consumer Discretionary
    5%
  • Telecommunications
    5%
  • Health Care
    4%
  • Industrials
    3%
  • Consumer Staples
    2%
  • Energy
    1%
  • Utilities
    1%
  • Real Estate
    1%
  • Basic Materials
    1%

The portfolio is heavily weighted towards the financial sector, primarily due to the large allocation in JPMorgan Chase & Co. This concentration exposes the portfolio to sector-specific risks, such as regulatory changes or economic downturns. A more balanced sector allocation, similar to common benchmarks, would help mitigate these risks. Including sectors like healthcare, technology, and consumer goods could provide more stability and growth opportunities, especially during periods of financial sector volatility.

Regions Info

  • North America
    100%

Geographically, the portfolio is overwhelmingly focused on North America, with over 99% exposure. This lack of geographic diversification could limit potential benefits from global growth opportunities. While North American markets are robust, adding exposure to other regions like Europe or Asia could enhance diversification and reduce regional risk. Common benchmarks often include a more balanced global allocation, offering a hedge against localized economic downturns.

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.

Optimizing the portfolio using the Efficient Frontier could enhance the risk-return balance. This method identifies the best possible allocation of assets to achieve maximum return for a given level of risk. While the current portfolio is heavily weighted towards growth, rebalancing to include more diversified assets may improve efficiency. This doesn't imply sacrificing growth but rather achieving it with a better risk profile, enhancing long-term stability.

Dividends Info

  • JPMorgan Chase & Co 1.90%
  • Invesco NASDAQ 100 ETF 0.50%
  • SPDR® Portfolio S&P 500 ETF 0.90%
  • Weighted yield (per year) 1.44%

The portfolio's dividend yield is relatively low at 1.44%, with the primary contributor being JPMorgan Chase & Co. Dividends can provide a steady income stream and help smooth returns over time. For growth-focused investors, reinvesting dividends can compound returns. However, increasing exposure to high-dividend stocks or funds could enhance income generation. This strategy could be particularly beneficial in volatile markets, offering a cushion against capital losses.

Ongoing product costs Info

  • Invesco NASDAQ 100 ETF 0.15%
  • SPDR® Portfolio S&P 500 ETF 0.02%
  • Weighted costs total (per year) 0.02%

The portfolio's costs are impressively low, with a Total Expense Ratio (TER) of 0.02% for the SPDR® Portfolio S&P 500 ETF. Low costs can significantly boost long-term returns, as less money is lost to fees. Although the Invesco NASDAQ 100 ETF has a slightly higher fee, it remains competitive. Regularly reviewing and, if possible, reducing costs can further enhance returns. Consider evaluating other low-cost funds to maintain cost efficiency.

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