A balanced portfolio heavily concentrated in US equities with moderate risk and low diversification

Report created on Jan 11, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

The portfolio consists entirely of the Vanguard S&P 500 UCITS ETF, representing a 100% allocation to US equities. This single ETF structure implies a lack of diversification across asset classes. While the S&P 500 is a renowned benchmark for US large-cap equities, relying solely on this ETF limits exposure to other asset classes like bonds or international equities. To enhance diversification, consider incorporating additional asset classes, which can help mitigate risk and improve stability in various market conditions.

Growth Info

Historically, the portfolio has exhibited a strong Compound Annual Growth Rate (CAGR) of 16.03%. This impressive performance reflects the robust growth of US large-cap stocks over recent years. However, it's important to note the portfolio's maximum drawdown of -25.48%, which indicates potential volatility during market downturns. While past performance is not indicative of future results, it underscores the importance of balancing growth with risk management. Diversifying beyond US equities could help reduce the impact of such drawdowns.

Projection Info

The Monte Carlo simulation, using 1,000 iterations, projects a wide range of potential outcomes for the portfolio. With an annualized return of 17.76% across all simulations, the forecast is optimistic. However, it's crucial to remember that these projections are based on historical data and assumptions, which may not hold true in future market conditions. The 5th percentile result shows a potential portfolio increase of 256.16%, highlighting the uncertainty and risk inherent in investment projections. Diversifying can help stabilize future returns.

Asset classes Info

  • Stocks
    100%

The portfolio's allocation is entirely within the stock asset class, specifically US large-cap equities. This singular focus limits the benefits of diversification, such as risk reduction and smoother returns. A more balanced portfolio typically includes a mix of stocks, bonds, and other assets to spread risk across different economic environments. Consider integrating fixed income or alternative investments to achieve a more diversified asset allocation, aligning with balanced portfolio benchmarks.

Sectors Info

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

Sector allocation within the S&P 500 ETF shows a significant concentration in technology (32.63%), followed by financial services and consumer cyclicals. This tech-heavy focus may lead to higher volatility, especially during periods of regulatory changes or interest rate fluctuations. While the diversification across sectors is somewhat balanced, the reliance on technology could pose risks. To mitigate sector-specific risks, consider diversifying into other sectors or funds that offer broader exposure to different industries.

Regions Info

  • North America
    99%
  • Europe Developed
    1%

The portfolio is heavily skewed towards North American equities, with 99.42% exposure. This geographic concentration may limit benefits from global diversification, such as reducing region-specific risks and capturing growth in emerging markets. While the US market has historically performed well, diversifying into other regions can provide exposure to different economic cycles and opportunities. Consider adding international equity funds to balance the geographic exposure.

Dividends Info

  • Vanguard S&P 500 UCITS ETF 0.60%
  • Weighted yield (per year) 0.60%

The portfolio's dividend yield stands at 0.6%, which is modest but typical for a growth-oriented US equity ETF. While dividends contribute to total returns, the focus here is more on capital appreciation. For investors seeking income, consider balancing the portfolio with higher-yielding assets, such as dividend-focused equity funds or fixed-income securities. This approach can provide a steady income stream alongside potential growth.

Ongoing product costs Info

  • Vanguard S&P 500 UCITS ETF 0.07%
  • Weighted costs total (per year) 0.07%

The Vanguard S&P 500 UCITS ETF boasts a low Total Expense Ratio (TER) of 0.07%, which is advantageous for long-term investors. Lower costs mean more of your investment returns are retained, supporting better compounding over time. This cost efficiency is a positive aspect of the portfolio, aligning with best practices for minimizing fees. Continue to monitor and compare costs if considering additional funds to ensure they remain competitive.

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