A balanced US-focused portfolio with high equity concentration and moderate risk exposure

Report created on Dec 8, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

1/5
Single-Focused
Less diversification More diversification

Positions

This portfolio is heavily weighted towards equities, with 92.93% in stocks and a small allocation to gold (7%). The main holdings include the Vanguard S&P 500 ETF, accounting for 55% of the portfolio, and the Vanguard Growth Index Fund ETF Shares at 22%. This structure shows a significant focus on large-cap US equities, indicating a preference for stability and growth. While this composition can drive growth during market upswings, it also leaves the portfolio vulnerable to equity market downturns. Diversifying into other asset classes, like bonds or international stocks, could help mitigate risks and enhance stability.

Growth Info

The portfolio has demonstrated strong historic performance, with a compound annual growth rate (CAGR) of 16.29%. However, it also experienced a maximum drawdown of -32.86%, reflecting significant volatility during downturns. This performance suggests that while the portfolio is capable of delivering high returns, it is also prone to substantial losses during market corrections. Investors should be aware that past performance does not guarantee future results, and should consider strategies to mitigate potential losses, such as diversifying into less volatile asset classes.

Projection Info

A Monte Carlo simulation, which uses historical data to project future outcomes, indicates a wide range of potential returns. With 1,000 simulations, the median (50th percentile) return is projected at 396.53%, while the 5th percentile shows a loss of -29.74%. Although 91.4% of simulations resulted in positive returns, this method cannot predict future performance with certainty due to its reliance on past data. Investors should use these projections as one of many tools in decision-making, considering other factors like market conditions and personal risk tolerance.

Asset classes Info

  • Stocks
    93%
  • Other
    7%

The portfolio is predominantly allocated to equities, with a minor allocation to gold. This concentration in equity assets suggests a strategy focused on capital appreciation. However, the lack of diversification into other asset classes like bonds or cash equivalents may increase vulnerability to market volatility. Diversifying into additional asset classes could potentially reduce risk and provide a buffer against equity market downturns, enhancing the overall stability of the portfolio.

Sectors Info

  • Technology
    29%
  • Telecommunications
    16%
  • Industrials
    13%
  • Consumer Discretionary
    9%
  • Financials
    8%
  • Health Care
    8%
  • Consumer Staples
    4%
  • Energy
    2%
  • Real Estate
    2%
  • Utilities
    2%
  • Basic Materials
    1%

Sector allocation is heavily skewed towards technology (29.11%) and communication services (16.02%), with smaller allocations across other sectors. This concentration can lead to higher volatility, especially if these sectors experience downturns. While technology and communication services have been strong performers, relying too heavily on them could expose the portfolio to sector-specific risks. Diversifying into sectors like consumer staples or utilities might balance the risk and provide more consistent returns.

Regions Info

  • North America
    93%

The portfolio is overwhelmingly focused on North America, with 92.66% exposure, and negligible investments in Europe and Asia. This geographic concentration increases susceptibility to region-specific economic and political risks. Although the US market has been a strong performer, diversifying geographically can reduce risk and capture growth opportunities in other regions. Consider adding international assets to the portfolio to benefit from global economic growth and reduce regional dependency.

Redundant positions Info

  • Vanguard S&P 500 ETF
    Vanguard Growth Index Fund ETF Shares
    High correlation

The portfolio contains highly correlated assets, particularly between the Vanguard S&P 500 ETF and the Vanguard Growth Index Fund ETF Shares. High correlation means these assets tend to move in tandem, which limits diversification benefits. Reducing correlation by introducing assets that behave differently during market shifts can enhance risk management. Consider reallocating some funds to assets with low or negative correlation to existing holdings, potentially reducing volatility and improving stability.

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.

Optimizing the portfolio using the Efficient Frontier could improve the risk-return ratio by reallocating existing assets. The Efficient Frontier is a concept that identifies the best possible return for a given level of risk. In this case, removing highly correlated assets and redistributing funds to achieve better diversification could enhance efficiency. However, optimization is based on current assets and allocation, not introducing new investments. This process aims to achieve the best risk-adjusted return without necessarily expanding asset diversification.

Dividends Info

  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Growth Index Fund ETF Shares 0.50%
  • Weighted yield (per year) 0.77%

The portfolio offers a modest dividend yield of 0.77%, largely driven by the Vanguard S&P 500 ETF's 1.2% yield. While dividends can provide a steady income stream, the portfolio's yield is relatively low, focusing more on growth than income. Investors seeking higher income might consider reallocating some funds to higher-yielding assets or dividend-focused ETFs. Balancing growth and income can help achieve a more stable return profile and meet income needs.

Ongoing product costs Info

  • iShares Gold Trust 0.25%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Growth Index Fund ETF Shares 0.04%
  • Weighted costs total (per year) 0.04%

Portfolio costs are minimal, with an overall total expense ratio (TER) of 0.04%. Low fees are beneficial as they can significantly enhance long-term returns by reducing the drag on performance. Keeping costs low is essential, especially in a portfolio focused on growth. Investors should continue to monitor fees and consider cost-effective alternatives when making changes to the portfolio. Ensuring expenses remain low can maximize net returns over time.

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