A highly concentrated aggressive stock portfolio with strong past gains but extreme downside risk

Report created on Nov 14, 2024

Risk profile Info

6/7
Aggressive
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

This portfolio is made up of eight individual stocks, with the top three positions alone taking up almost 60% of the total. Everything is in a single asset class – individual company shares – with no funds or other vehicles to spread risk. This kind of concentration matters because a few bad outcomes in one or two names can drag down the entire account, especially during market stress. The structure fits an aggressive style but leaves little margin for error. Shifting a portion toward more diversified building blocks could smooth the ride while still keeping a growth-first mindset.

Growth Info

Historically, the portfolio shows a very strong compound annual growth rate (CAGR) of about 23%. CAGR is like average speed on a road trip: it smooths out the bumps to show long-run pace. However, the max drawdown of almost -65% means that at one point, someone could have seen the value sliced to about one‑third. That kind of hit is emotionally and financially tough. The good news is that strong upside shows the growth potential is real. Still, it can help to plan around the worst cases, not just the headline growth number.

Projection Info

The Monte Carlo results hint at how wild the ride could be going forward. Monte Carlo simulations use many random “what if” price paths based on past ups and downs to estimate future ranges. Here, the median outcome shows a large loss and the 5th percentile is near total wipe‑out, highlighting how tail risk (rare but brutal scenarios) is substantial. Even though the average simulated return looks high, that average is pulled up by a few huge wins. Considering some de‑risking steps can make the projected range of outcomes less extreme without killing the upside story.

Asset classes Info

  • Stocks
    100%

From an asset class standpoint, everything sits in equities, which are shares of companies. That’s great for long‑term growth but also the reason volatility is so intense. There are no stabilizing assets such as cash‑like holdings or lower‑risk instruments that might cushion big drops. A 100% stock mix is classic for very aggressive profiles, but even within that, there’s room to blend in more diversified equity exposures. For example, mixing high‑growth names with steadier large companies or broad baskets can help reduce the chance that a single theme or story dominates the entire outcome.

Sectors Info

  • Consumer Discretionary
    32%
  • Financials
    27%
  • Technology
    27%
  • Consumer Staples
    11%
  • Telecommunications
    2%

Sector exposure leans heavily toward consumer cyclicals, financial‑style businesses, and technology, with a modest slice in consumer defensive and a tiny piece in communication services. Consumer cyclicals and tech often boom when growth expectations are strong but can sell off hard when rates rise or the economy slows. The current setup is clearly tilted toward “risk‑on” areas, which aligns with the aggressive label but raises crash risk. The balance is not terrible, but it’s narrow. Blending in more areas that tend to behave differently across cycles could help make the sector mix more resilient without abandoning growth.

Regions Info

  • North America
    100%

All exposure is in North America, which is common for a U.S.‑based investor and has historically been rewarding. This home‑region focus can be comforting and easy to follow. The flip side is missing potential diversification from other parts of the world that may perform differently across cycles and interest‑rate regimes. Global markets don’t move in perfect lockstep, so having at least some international exposure can help when the local market stumbles. Sticking with a primarily North American bias is reasonable, but even a modest allocation to other regions could broaden the opportunity set and reduce single‑region risk.

Market capitalization Info

  • Mega-cap
    43%
  • Large-cap
    31%
  • Mid-cap
    16%
  • Small-cap
    10%

Market cap exposure ranges from mega‑cap giants to small‑cap names, with a tilt toward mega and large stocks. Mega and big companies often offer more stability and liquidity, while mid and small caps can be more volatile but provide higher growth potential. This mix is actually fairly healthy for an aggressive style, giving both solid anchors and high‑beta names. The key issue isn’t the size balance but the concentration in a small list of stocks. Keeping a mix of sizes is a plus; expanding the number of holdings within each size bucket could make the risk more manageable.

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.

From a risk‑return optimization angle, the current mix likely sits below the Efficient Frontier that could be built from the same basic ingredients. The Efficient Frontier is the set of mixes that give the best possible return for each level of risk, like finding the fastest route for a given amount of fuel. With these holdings, shifting some weight away from the most volatile individual names and spreading it among more stable ones or broader exposures could move closer to “efficient.” That doesn’t mean removing risk, just using it in a way that targets more return per unit of volatility.

Dividends Info

  • The Cheesecake Factory 2.10%
  • PayPal Holdings Inc 0.20%
  • Weighted yield (per year) 0.37%

The overall dividend yield of the portfolio is very low, under 0.5%, because most positions are growth‑oriented and reinvest profits into expansion. Dividends are cash payments companies make to shareholders, and they can provide steady income and a buffer in down markets. For a pure growth strategy with a long horizon, a low yield is not necessarily a problem; the focus is on price appreciation. Still, it’s useful to know that almost all return must come from future price gains. If steady cash flow becomes more important, shifting a slice toward stronger dividend payers could balance things out.

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