Grading My Portfolio Risk

Posted on Mi 11 Juni 2008 in misc • 1 min read

  • 401K tags:
  • 401K
  • AAII
  • Risk meta: _edit_last: '5' dsq_thread_id: '181043737' author:

    Reader sc suggested I check out the American Association of Individual Investors and poke through their portfolio scans and risk analysis. In the end I signed up as a member of AAII and Riskgrades to help analyze my portfolio risk for my 401k and IRA holdings.

    Overall I really like Riskgrades! My initial analysis confirms what my Excel based Monte Carlo sim revealed; I'm doing a good job but I can do better and I have holes in my strategy.

    Based on Riskgrades, our retirement portfolio is designated as a growth portfolio with a very low volatility relative to the S&P500; it has a beta of 0.79. My risk was reduced by 14% because of my diversification and 99% of S&P500 stocks are more riskier than our retirement portfolio. The good news is that my individual stock selections (with a few funds) are the biggest driver of my returns but my large cash position (40%) is killing my returns right now.

    As I wrote in my Achieving Financial Critical Mass post, I'll be contributing more money to our IRA's and selecting more stocks. In our 401K's, I'm going to start shifting our large cash positions back into the market, over the next few months, into more aggressive funds I suspect that I'll end up holding 95% stocks by the end of this year with 5% in cash and bonds.