My Equity Portfolio

What I am invested in (Or what I want to invest in)

Equity: Single-company

  • Technology
    • LYFT (Lyft)
    • INTC (Intel)
    • AMD (AMD)
    • NVDA (NVIDIA)
    • META (Meta)
    • DELL (Dell)
  • Entertainment
    • PARAA (Paramount)
    • DIS (Disney)
    • NTDOY (Nintendo)
    • MANU (Manchester United)
  • Finance¬†
    • TROW (T. Rowe Price)
    • DFS (Discover)
  • Telecommunications
    • VZ (Verizon)
    • CMSA (Comcast)
  • Retail
    • DLTR (Dollar Tree)
  • Transportation
    • DAL (Delta Air Lines)

Rationale

  • Sector Balance with a Tech Edge: I recognize the transformative power of technology across various sectors. While maintaining a diversified portfolio, I lean towards companies poised to lead or benefit significantly from technological advancements and shifts in digital culture.
  • Global Outlook: My investments aren’t confined to one region or country. I believe in capturing growth from both developed and emerging markets.
  • Innovation and Adaptability: Companies like NVDA, AMD, and META demonstrate my conviction in firms that are either disruptors in their space or show adaptability to changing industry landscapes.¬†
  • Stable Dividends & Blue-Chips: I balance my growth-focused approach by including established players known for stability and dividends, like VZ, TROW, and SCHD. This helps in ensuring a stable income stream and lowering the portfolio’s overall volatility.
  • Diversification: From entertainment (DIS) to finance (DFS) and transportation (DAL) to retail (DLTR), my portfolio represents a belief that opportunities arise in various industries, each contributing uniquely to growth and stability.

Risks

  • Concentration Risk: Several of my holdings are directly in the technology sector. While technology has shown strong growth in recent years, overexposure can expose me to sector-specific downturns or regulatory challenges. However, I think… no, I know tech is the future.
  • Cyclical Stocks: Some of the companies, like DAL (airlines) and MANU (sports & entertainment), are cyclical in nature. They can be more sensitive to economic downturns, and their performance can fluctuate based on economic cycles.
  • Economic Sensitivity: Holdings like DFS (financial services) and DLTR (discount retail) are sensitive to broader economic conditions. In recessions, for instance, credit defaults might rise, affecting DFS, while DLTR might see increased business as consumers become more price-conscious. I try to include companies that are on either side of the sensitivity spectrum to compensate.
  • Geopolitical Risks: Companies with significant international exposure (like DIS with its global media networks) can be affected by geopolitical tensions, trade wars, or other international incidents.
  • Currency Risk: Some of my holdings, such as NTDOY and MANU, expose me to international markets. This means they can be affected by currency fluctuations.
  • Regulatory and Policy Changes: Companies like LYFT and META operate in sectors where regulations are still evolving, and any unexpected changes can impact their business models.
  • Competition: Many of my tech investments face stiff competition in their respective markets and even cross-portfolio. However, this is less a bug more of a feature! I am not picking winners, I want to ride the market.
  • Interest Rate Sensitivity: Stocks like DFS (financial services) can be sensitive to interest rate changes. For instance, a rise in interest rates might impact consumer borrowing habits or the company’s borrowing costs.
  • Dividend Risk: While some of my investments like SCHD and VZ are known for dividends, it’s essential to monitor the sustainability of these dividends. Economic downturns or company-specific issues can lead to reduced or suspended dividends.
  • Market Liquidity Risk: Some of the less mainstream stocks might have lower liquidity, which can lead to volatility and challenges in selling significant quantities without affecting the stock price.
  • Over-diversification: While diversification is often a strength, there’s also a risk of being overly diversified, leading to diluting potential gains from star performers. I am less worried about this than I am under-diversification.

Equity: ETF

  • Stocks
    • VOO (S&P 500)- 25%
    • IJH (Mid-Cap) – 7.5%
    • IJR (Small-Cap) – 7.5%
    • IXUS (International) – 5%
  • Bonds
    • GOVT (US Treasury Bonds) – 20%
    • VCSH (Short-Term Corporate Bonds)- 20%
    • MDYHX (Municipal Bonds)- 10%
  • Alternatives
    • VNQ (Real-Estate) – 5%

Rationale

  • ETFs: I believe that Exchange Traded Funds (ETFs) provide an efficient means to achieve broad market exposure, diversification, and risk management, capturing the collective wisdom of the market while minimizing company-specific risks.
  • Blend of Growth and Stability: Both growth and stability are vital for a resilient portfolio. My investments reflect this balance by combining equity ETFs, which have growth potential, with bond ETFs, known for stability and income generation.
  • Diversification: With ETFs like VOO, IJH, and IJR, I gain exposure to large-cap, mid-cap, and small-cap companies, ensuring I capture growth across various company sizes in the U.S. market.
  • International Diversification: IXUS allows me to tap into the growth potential of international markets, diversifying my geographical reach and mitigating risks associated with singular economies.
  • Real Assets as Hedge: My position in VNQ gives me exposure to real estate, acting as a potential hedge against inflation and offering a different return profile than equities and fixed income.
  • Defensive Stance with Fixed Income: GOVT and VCSH, representing U.S. government securities and corporate short-term bonds, provide the portfolio with stability, especially during equity market downturns, and offer a steady stream of income.
  • Duration Management: My fixed-income choices reflect a balance between short-term (like VCSH) and longer durations (like GOVT), helping manage the interest rate risk.

Risks

  • Interest Rate Risk: With holdings like GOVT and VCSH, my portfolio is exposed to interest rate movements. As interest rates rise, bond prices typically fall, which could negatively impact the value of these ETFs.
  • Equity Market Volatility: Despite diversification across company sizes and geographies, any broad market downturn will likely impact the equity (45%) components of my portfolio.
  • Concentration in U.S. Markets: While I have some international exposure through IXUS, the majority of my equity investments are U.S.-centric. This concentration might expose me to any downturns or disruptions specific to the U.S. market.
  • Real Estate Market Sensitivity: VNQ focuses on real estate, which can be cyclical and sensitive to factors like interest rate changes, economic downturns, and property market dynamics.
  • Liquidity Risk: While ETFs are generally liquid, in extreme market conditions, there might be discrepancies between the ETF’s price and its underlying net asset value, leading to potential liquidity issues.
  • Currency Risk: The international exposure through IXUS subjects my portfolio to currency risk. Fluctuations in currency values can affect the returns of this ETF.
  • Rebalancing Costs: To maintain my set weightings, regular rebalancing will be necessary. Depending on the frequency, this could incur transaction costs and tax implications.
  • Tracking Error: All ETFs have a potential tracking error, meaning there might be slight discrepancies between the performance of the ETF and the performance of its underlying index.
  • Inflation Risk: Bonds, especially those with lower yields like many government securities, can be sensitive to inflation. If inflation rises significantly, the real returns on these bonds (like those in GOVT) can be eroded.
  • Credit Risk: Though generally considered low-risk, short-term corporate bonds (like those in VCSH) do carry a credit risk. If there’s a significant economic downturn, the possibility of defaults could increase, impacting the ETF’s value.
  • Lack of Active Management: Since these are passive ETFs aiming to track their respective indices, they won’t adapt to market changes as actively managed funds might. This means they won’t necessarily outperform the market, nor will they have active strategies to avoid downturns.
  • Costs: While ETFs generally have lower fees than actively managed funds, they still come with expense ratios. Over time, these fees can accumulate and affect overall returns.

This is Not FInancial Advice

But I am open to yours!