A growth-focused portfolio with high stock concentration and minimal geographic diversification

Report created on Dec 12, 2024

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

This portfolio is heavily weighted towards a single ETF, the Vanguard Total Stock Market Index Fund, which makes up over 77% of the total allocation. The remaining portion is composed of individual stocks, including BlackRock Inc., Alibaba Group Holding Ltd, and Constellation Energy Corp. This composition indicates a strong preference for equities, with minimal cash holdings. Such a structure suggests a focus on capital appreciation rather than income generation. For investors, maintaining a balance between diversification and concentration is crucial to managing risk and optimizing returns.

Growth Info

Historically, this portfolio has demonstrated robust performance with a compound annual growth rate (CAGR) of 13.81%. However, it has also experienced a maximum drawdown of 22.51%, indicating periods of significant volatility. This performance suggests that while there are opportunities for substantial gains, there is also potential for considerable losses. Understanding past performance helps investors gauge the potential risks and rewards associated with their investments, though it's important to remember that past performance is not indicative of future results.

Projection Info

Using Monte Carlo simulations, which involve running numerous hypothetical scenarios based on historical data, this portfolio's future performance has been projected. The simulations suggest a wide range of potential outcomes, with a 5th percentile return of -1.56% and a 67th percentile return of 2,371.97%. These projections highlight the uncertainty and variability inherent in investing. While the median simulation suggests positive returns, it's important to remember that these are only estimates and actual results may vary.

Asset classes Info

  • Stocks
    100%

The portfolio's allocation is almost entirely in stocks, with a negligible amount in cash. This high concentration in a single asset class indicates a strong growth focus, as equities typically offer higher potential returns compared to other assets. However, this also means increased exposure to market volatility. Diversifying across different asset classes, such as bonds or real estate, could help mitigate risk and provide more stable returns over time.

Sectors Info

  • Financials
    29%
  • Technology
    24%
  • Consumer Discretionary
    10%
  • Health Care
    9%
  • Industrials
    7%
  • Telecommunications
    7%
  • Consumer Staples
    4%
  • Utilities
    4%
  • Energy
    3%
  • Real Estate
    2%
  • Basic Materials
    2%

Sector allocation shows a significant concentration in Financial Services and Technology, which together make up over 50% of the portfolio. This concentration can lead to increased risk if these sectors underperform. While sector concentration can result in higher returns during periods of strong performance, it also exposes the portfolio to sector-specific risks. A more balanced sector allocation could help reduce volatility and enhance diversification, providing a smoother investment journey.

Regions Info

  • North America
    98%
  • Asia Emerging
    2%

The geographic allocation is heavily skewed towards North American assets, accounting for over 97% of the portfolio. This lack of geographic diversification means the portfolio is highly exposed to the economic and political conditions of a single region. While investing in familiar markets can be comforting, it also limits potential opportunities abroad. Incorporating more international exposure could help diversify risk and potentially enhance returns by tapping into growth in other regions.

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's current structure could potentially be optimized using the Efficient Frontier concept, which seeks the best possible risk-return ratio. This involves adjusting the allocation among existing assets to achieve a more efficient balance. While the portfolio is already growth-focused, slight adjustments could enhance its risk-adjusted returns. However, it's important to note that optimization is based on historical data, which may not fully predict future market behavior.

Dividends Info

  • Alibaba Group Holding Ltd 1.90%
  • BlackRock Inc 1.40%
  • Constellation Energy Corp 0.60%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.20%
  • Weighted yield (per year) 1.24%

The portfolio's dividend yield stands at 1.24%, with contributions from Alibaba, BlackRock, and Constellation Energy. While dividends provide a steady income stream, the yield here is modest, reflecting the growth-oriented nature of the portfolio. Investors seeking income might consider increasing exposure to dividend-paying stocks or funds. Balancing growth and income can create a more resilient portfolio, especially during market downturns when capital appreciation may be limited.

Ongoing product costs Info

  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Weighted costs total (per year) 0.02%

The portfolio benefits from low costs, with the Vanguard ETF having a total expense ratio of just 0.03%. Keeping costs low is crucial for maximizing long-term returns, as high fees can significantly erode gains over time. Investors should regularly review and compare fees across their holdings to ensure they are getting the best value. By prioritizing low-cost investments, one can enhance overall portfolio performance without taking on additional risk.

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