A concentrated US-focused portfolio with strong historical performance but limited geographic diversification

Report created on Jan 25, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

This portfolio consists entirely of the Vanguard Total Stock Market Index Fund ETF, focusing solely on U.S. equities. While this offers a comprehensive exposure to the U.S. market, it lacks diversification across different asset classes and regions. Having a single asset class can expose the portfolio to risks associated with market downturns. A more diversified portfolio might include bonds or international equities to mitigate this risk.

Growth Info

Historically, the portfolio has performed well, with a Compound Annual Growth Rate (CAGR) of 14.06%. This indicates strong growth over time. However, it also experienced a significant maximum drawdown of -35.01%, highlighting potential volatility. Comparing this to a benchmark, such as the S&P 500, can provide context on performance relative to the broader market. It's crucial to remember that past performance doesn't guarantee future results.

Projection Info

The Monte Carlo simulation projects a wide range of potential outcomes, with an average annualized return of 14.85%. This method uses historical data to simulate future returns, but it's important to note that these are not predictions. The 5th percentile suggests a modest gain, while the 67th percentile indicates substantial growth. While simulations offer insights, they cannot account for unforeseen market events.

Asset classes Info

  • Stocks
    100%

The portfolio is entirely invested in stocks, which provides potential for high returns but also increases risk. Diversifying into other asset classes, like bonds or real estate, can reduce volatility and enhance stability. Comparing this allocation with a balanced benchmark reveals a lack of fixed-income securities, which could provide a buffer during market downturns.

Sectors Info

  • Technology
    32%
  • Financials
    14%
  • Consumer Discretionary
    11%
  • Health Care
    10%
  • Telecommunications
    9%
  • Industrials
    9%
  • Consumer Staples
    5%
  • Energy
    3%
  • Real Estate
    3%
  • Utilities
    2%
  • Basic Materials
    2%

The portfolio is heavily weighted towards technology, with a 32% allocation. This sector has been a strong performer but is also subject to high volatility, especially during interest rate changes. Other sectors like financial services and consumer cyclicals are also represented, but a more balanced sector distribution could reduce risk. Aligning sector weights with a benchmark can enhance diversification.

Regions Info

  • North America
    100%

With 100% exposure to North America, this portfolio lacks geographic diversification. This concentration can increase vulnerability to regional economic downturns. Including international equities, particularly from emerging markets, could provide growth opportunities and reduce risk. Comparing this to global benchmarks highlights the need for broader geographic exposure.

Market capitalization Info

  • Mega-cap
    41%
  • Large-cap
    31%
  • Mid-cap
    20%
  • Small-cap
    6%
  • Micro-cap
    2%

The portfolio is diversified across market capitalizations, with a significant portion in mega and large-cap stocks. This mix provides stability and growth potential. Smaller allocations to mid, small, and micro-cap stocks offer additional growth opportunities but can also increase volatility. Balancing market cap exposure with a benchmark can optimize risk and return.

Dividends Info

  • Vanguard Total Stock Market Index Fund ETF Shares 1.20%
  • Weighted yield (per year) 1.20%

With a dividend yield of 1.20%, this portfolio provides a modest income stream. Dividends can offer stability and enhance total returns, especially in volatile markets. Investors seeking income might consider higher-yielding assets. Comparing this yield to a benchmark can help assess income potential relative to similar portfolios.

Ongoing product costs Info

  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Weighted costs total (per year) 0.03%

The portfolio's cost is impressively low, with a Total Expense Ratio (TER) of 0.03%. This supports better long-term performance by minimizing fees that can erode returns. Low costs align with best practices for passive investing and can enhance compounding over time. Maintaining this low-cost structure is beneficial for achieving financial goals.

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