A concentrated portfolio with a strong focus on US large-cap equities

Report created on Dec 31, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

The portfolio is heavily concentrated in two ETFs: Vanguard S&P 500 ETF and Invesco NASDAQ 100 ETF. This structure results in a high exposure to large-cap US equities, with 80% in the S&P 500 and 20% in the NASDAQ 100. Compared to typical balanced portfolios, which often include bonds or international equities, this composition is less diversified. To enhance diversification, consider adding assets from different classes, such as bonds or international stocks, which can help mitigate risk and balance returns over time.

Growth Info

Historically, the portfolio has performed well, boasting a CAGR of 15.49%. This indicates strong growth, especially compared to the average market returns. However, it has experienced a significant maximum drawdown of -26.46%, highlighting potential volatility. While past performance can offer insights, it's not a guarantee of future results. To manage volatility, consider incorporating more stable assets, which might help in cushioning against future downturns.

Projection Info

Using Monte Carlo simulations, the portfolio's future performance was projected with a median return of 613.91% over the simulated period. Monte Carlo simulations use historical data to predict a range of possible outcomes, but they do not ensure future results. With 993 out of 1,000 simulations showing positive returns, the outlook appears favorable. However, to better manage risk, consider diversifying the portfolio to reduce the impact of unfavorable market conditions.

Asset classes Info

  • Stocks
    100%

The portfolio's allocation is almost entirely in stocks, with a negligible amount in cash. This lack of asset class diversification can increase risk, as the portfolio is heavily reliant on equity market performance. Balanced portfolios typically include bonds or other fixed-income assets to stabilize returns. Introducing bonds or alternative investments could provide a cushion against stock market volatility, enhancing long-term stability.

Sectors Info

  • Technology
    37%
  • Consumer Discretionary
    11%
  • Telecommunications
    11%
  • Financials
    10%
  • Health Care
    10%
  • Industrials
    7%
  • Consumer Staples
    6%
  • Energy
    3%
  • Utilities
    2%
  • Real Estate
    2%
  • Basic Materials
    2%

The portfolio is highly concentrated in the technology sector, comprising 36.59% of the holdings, followed by consumer cyclicals and communication services. This sectoral concentration may lead to increased volatility, especially during market corrections or economic shifts. Diversifying across more sectors could mitigate sector-specific risks and provide a smoother return profile. Consider reallocating to include more defensive sectors like utilities or consumer staples.

Regions Info

  • North America
    99%
  • Europe Developed
    1%

The portfolio's geographic exposure is overwhelmingly North American, at 99.06%. This lack of international diversification can increase vulnerability to regional economic downturns. Global diversification can reduce risk by spreading investments across different economic environments. Introducing more international equities could provide exposure to growth opportunities outside the US and help balance geographic risk.

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 benefit from optimization using the Efficient Frontier, which seeks the best risk-return ratio by adjusting asset weights. While this process doesn't guarantee diversification, it can enhance the portfolio's efficiency based on current assets. Consider rebalancing the existing holdings to achieve a more optimal risk-return profile, potentially improving performance without introducing new assets.

Dividends Info

  • Invesco NASDAQ 100 ETF 0.60%
  • Vanguard S&P 500 ETF 1.20%
  • Weighted yield (per year) 1.08%

The portfolio's dividend yield is 1.08%, with the Vanguard S&P 500 ETF providing a higher yield than the Invesco NASDAQ 100 ETF. While dividends contribute to total returns, the focus on growth suggests that capital appreciation is prioritized. Investors seeking income might consider increasing exposure to high-dividend stocks or funds to boost cash flow, balancing growth with income.

Ongoing product costs Info

  • Invesco NASDAQ 100 ETF 0.15%
  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.05%

The total expense ratio (TER) of 0.05% is impressively low, supporting better long-term performance by minimizing cost drag. Low costs are a significant advantage, as they allow more of the portfolio's returns to be retained. Maintaining this cost efficiency is beneficial, but always review whether there are opportunities to reduce costs further without sacrificing quality or diversification.

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