A concentrated growth-focused portfolio with high risk and limited sector diversification

Report created on Jan 6, 2025

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 in common stocks, with 75% of assets allocated to equities and 25% in a government cash reserve fund. The top three holdings, ConocoPhillips, Apple, and Microsoft, make up 75% of the portfolio, indicating a significant concentration in individual stocks. While this concentration can lead to higher potential returns, it also increases the risk of volatility. For a growth-oriented profile, this composition is expected, but adding more diverse assets could help stabilize returns.

Growth Info

Historically, the portfolio has performed well, with a compound annual growth rate (CAGR) of 16.98%. However, it has also experienced a maximum drawdown of 30.06%, reflecting significant volatility. This performance suggests that while the portfolio has delivered strong returns, it has also been subject to substantial risk. Comparing this to a benchmark index, the portfolio's returns are attractive, but caution is advised due to the high drawdown, which could impact investor confidence during market downturns.

Projection Info

The Monte Carlo simulation, which uses historical data to project future outcomes, shows a wide range of potential returns. The median projection suggests a 642.49% increase, with 975 out of 1,000 simulations showing positive returns. While the annualized return of 19.0% is promising, it's important to note that these projections are based on past data and do not guarantee future results. Investors should be prepared for variability and consider strategies to manage potential risks.

Asset classes Info

  • Stocks
    75%

The portfolio's asset allocation is heavily skewed towards stocks, with 75% in equities. This allocation aligns with a growth-focused strategy but lacks diversification across other asset classes such as bonds or real estate, which could provide stability during market volatility. Comparing this to a typical balanced portfolio, which might have a more even distribution across asset classes, suggests a need for diversification to mitigate risk and enhance long-term returns.

Sectors Info

  • Technology
    45%
  • Energy
    30%

The portfolio is concentrated in the technology and energy sectors, making up 75% of the total allocation. This sectoral focus can lead to higher returns when these industries perform well but also increases exposure to sector-specific risks. For instance, tech-heavy portfolios might experience volatility during regulatory changes or interest rate hikes. Balancing exposure across more sectors could reduce risk and improve resilience against market fluctuations.

Regions Info

  • North America
    75%

With 75% of the portfolio's assets allocated to North America, the geographic exposure is limited. This concentration can lead to missed opportunities in other regions that may offer growth potential. Comparing this to a global benchmark, which typically has a more diverse geographic allocation, suggests that expanding exposure to international markets could enhance diversification and provide a hedge against regional 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.

The portfolio could potentially be optimized using the Efficient Frontier, which aims to achieve the best possible risk-return ratio. This involves adjusting the current asset allocation to balance risk and return more effectively. While the portfolio is currently concentrated, exploring different combinations of assets could enhance efficiency. It's important to note that this optimization focuses on the existing assets and does not necessarily address diversification or other investment goals.

Dividends Info

  • Apple Inc 0.40%
  • ConocoPhillips 3.10%
  • Fidelity Govt Cash Rsrvs 4.10%
  • Microsoft Corporation 0.70%
  • Weighted yield (per year) 2.18%

The portfolio's dividend yield is 2.18%, with contributions from Apple, ConocoPhillips, and Microsoft. While dividends can provide a steady income stream, the focus on growth stocks suggests that capital appreciation is the primary goal. For investors seeking income, increasing exposure to higher-yielding assets might be beneficial. However, for a growth-oriented strategy, the current yield aligns with the portfolio's objectives.

Ongoing product costs Info

  • Fidelity Govt Cash Rsrvs 0.26%
  • Weighted costs total (per year) 0.06%

The portfolio's costs are relatively low, with a total expense ratio (TER) of 0.06%. This is advantageous as lower costs can significantly enhance long-term returns by reducing the drag on performance. The minimal expenses associated with the Fidelity Govt Cash Rsrvs fund further support cost efficiency. Maintaining this low-cost structure is beneficial for achieving optimal net returns, and investors should continue to monitor expenses to ensure they remain competitive.

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