A concentrated portfolio with a focus on US equities and technology sector dominance
Report created on Dec 6, 2024Risk profile
4/7
Diversification profile
2/5
Positions
-
VF Vanguard S&P 500 Index ETF
VFV - CA92205Y1051 100.00%
The portfolio is entirely invested in the Vanguard S&P 500 Index ETF, which means it's heavily concentrated in US equities. This ETF tracks the performance of the 500 largest companies listed on stock exchanges in the United States. While this offers exposure to a broad range of sectors within the US market, it limits diversification across different asset classes and geographic regions. A concentrated portfolio like this can experience significant swings based on the performance of the US market. To mitigate risks, consider diversifying into other asset classes, such as bonds or international equities, to reduce dependency on the US market's performance.
Growth
Historically, the portfolio has delivered a compound annual growth rate (CAGR) of 15.73%, which is impressive. However, it also experienced a maximum drawdown of 27.43%, indicating significant risk during downturns. The drawdown reflects the largest percentage drop from a peak to a trough, highlighting the potential volatility of this investment. While past performance can provide insights, it's not a guarantee of future returns. Investors should be prepared for potential fluctuations and consider their risk tolerance when relying on historical performance as a guide.
Projection
Using Monte Carlo simulations, the portfolio's future outcomes were modeled based on historical data. This method uses random sampling to project a range of potential future returns. The simulations suggest a median return of 713.79% over the investment period, with a 5th percentile return of 214.69%, indicating a wide range of possible outcomes. While 999 out of 1,000 simulations resulted in positive returns, it's important to note that such projections are based on historical patterns and assumptions, which may not hold true in the future. Investors should use these projections as a guide, not a certainty.
Asset classes
- US Equity 99%
The portfolio's allocation is overwhelmingly in US equities, making up over 99% of the total assets. This heavy concentration in a single asset class can lead to increased risk, as the portfolio is highly sensitive to the performance of the US stock market. While equities offer growth potential, they also come with higher volatility. Diversifying into other asset classes, such as fixed income or international assets, can help balance risk and provide more stable returns over time. Consider your risk tolerance and investment goals when evaluating this allocation.
Sectors
- 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 sector allocation within this portfolio is heavily weighted toward technology, which comprises over 33% of the total holdings. Other significant sectors include financial services, healthcare, and consumer cyclicals. This concentration in technology can lead to increased volatility, as the sector is known for rapid changes and market sensitivity. While tech has been a strong performer historically, it's important to consider balancing exposure across other sectors to mitigate risks associated with sector-specific downturns. Diversifying into underrepresented sectors can enhance stability and reduce reliance on a single industry's performance.
Regions
- North America 99%
- Europe Developed 1%
Geographically, the portfolio is almost entirely focused on North America, with 99.399% of assets allocated there. This lack of geographic diversification can expose the portfolio to regional economic downturns or political changes. While the US market has historically performed well, expanding into other regions, such as Europe or emerging markets, can provide additional growth opportunities and risk mitigation. Diversifying geographically can help balance the portfolio and reduce the impact of localized economic events, offering a more global perspective on investment opportunities.
Dividends
- Vanguard S&P 500 Index ETF 0.70%
- Weighted yield (per year) 0.70%
The Vanguard S&P 500 Index ETF offers a dividend yield of 0.7%, providing a modest income stream. While dividends can contribute to overall returns, this yield is relatively low compared to other income-focused investments. Investors seeking higher income might consider incorporating dividend-focused funds or individual stocks with higher yields. However, it's essential to balance the desire for income with the potential for growth, as higher-yield investments may come with increased risk. Evaluate your income needs and risk tolerance when considering adjustments to the dividend component of the portfolio.
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