A focused portfolio with strong US equity exposure and minimal diversification

Report created on Dec 30, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

This portfolio exclusively comprises the Vanguard S&P 500 ETF, which means it is entirely invested in US large-cap stocks. This singular focus results in low diversification, as it lacks exposure to other asset classes like bonds or international equities. While investing in a broad market index like the S&P 500 offers exposure to a wide range of sectors, it may not provide the same level of risk mitigation as a more diversified portfolio. Consider incorporating additional asset types to enhance diversification and potentially reduce overall risk.

Growth Info

Historically, the portfolio has performed well, with a Compound Annual Growth Rate (CAGR) of 13.93%. This growth is impressive compared to many benchmarks, reflecting the strong performance of the US equity market over recent years. However, it's important to note the significant maximum drawdown of -33.97%, indicating vulnerability to market downturns. This highlights the importance of diversification to potentially smooth out returns and mitigate the impact of market volatility.

Projection Info

The Monte Carlo simulation, which uses historical data to predict future outcomes, suggests a wide range of potential future returns for this portfolio. With 1,000 simulations, the median (50th percentile) projected return is 514.67%, while the 5th percentile is 78.14%. Though simulations show a high likelihood of positive returns, they are based on historical performance and do not guarantee future results. Consider these projections as part of a broader strategy that includes diversification and risk management.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily weighted towards stocks, with 99.92% in equities and a negligible amount in cash. This concentration in a single asset class can lead to higher volatility and risk, especially during market downturns. A more balanced allocation across different asset classes, like bonds or real estate, can provide stability and reduce risk. Diversifying into other asset classes can help achieve a more stable risk-return profile over the long term.

Sectors Info

  • Technology
    33%
  • Financials
    13%
  • Health Care
    11%
  • Consumer Discretionary
    10%
  • Telecommunications
    9%
  • Industrials
    8%
  • Consumer Staples
    6%
  • Energy
    3%
  • Utilities
    3%
  • Real Estate
    2%
  • Basic Materials
    2%

The portfolio is concentrated in the technology sector, which makes up 33.02% of the holdings. While this has driven strong returns in recent years, it also increases exposure to sector-specific risks, such as regulatory changes or technological disruptions. A more balanced sector allocation, including increased exposure to underrepresented areas like basic materials or utilities, can help mitigate these risks and enhance diversification.

Regions Info

  • North America
    99%
  • Europe Developed
    1%

The portfolio's geographic allocation is overwhelmingly concentrated in North America, at 99.4%. This heavy focus on a single region limits exposure to growth opportunities in other parts of the world, such as emerging markets or developed economies in Europe and Asia. Expanding geographic diversification can help spread risk and capture potential returns from global economic growth, providing a more balanced and resilient portfolio.

Dividends Info

  • Vanguard S&P 500 ETF 1.20%
  • Weighted yield (per year) 1.20%

The portfolio's dividend yield is 1.2%, which is relatively modest. While dividends provide a steady income stream, the overall yield is lower compared to portfolios with a focus on high-dividend stocks or other income-generating assets. Depending on investment goals, adding higher-yielding assets could enhance income without significantly altering the risk profile. Consider balancing growth and income objectives to optimize total returns.

Ongoing product costs Info

  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.03%

The portfolio benefits from very low costs, with a Total Expense Ratio (TER) of just 0.03%. This low cost is a significant advantage, as it minimizes the drag on returns over time. Keeping expenses low is crucial for long-term investment success, as it allows more of the portfolio's returns to compound. Continue to prioritize low-cost investment options to maintain an efficient cost structure.

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