A concentrated portfolio with strong US focus and moderate risk exposure

Report created on Dec 28, 2024

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 primarily of equity ETFs, with a significant allocation to the Vanguard S&P 500 ETF at over 50%. The remaining investments are spread across three other ETFs, focusing on broad market indices. Compared to common benchmarks, this portfolio leans heavily towards large-cap US stocks. While this composition supports potential growth, it lacks diversification across asset classes and geographies. To enhance stability and reduce risk, consider incorporating more varied asset types such as bonds or international equities.

Growth Info

Historically, this portfolio has delivered a strong CAGR of 15.25%, indicating robust past performance. However, it also experienced a significant max drawdown of -26.69%, reflecting potential volatility. While these figures show impressive growth, it's important to remember that past performance doesn't guarantee future results. Investors should prepare for possible market downturns by maintaining a diversified portfolio that can withstand fluctuations.

Projection Info

The Monte Carlo simulation projects a wide range of potential outcomes, with a median return of 595.02% and an annualized return of 16.14%. This forward-looking analysis uses historical data to estimate future performance, but it's not a prediction. While the majority of simulations result in positive returns, it's crucial to remember that market conditions can change. Consider stress-testing your portfolio against various scenarios to better understand potential risks and rewards.

Asset classes Info

  • Stocks
    100%

The portfolio is overwhelmingly invested in stocks, accounting for nearly 100% of the allocation. This heavy equity focus can drive growth but also increases exposure to market volatility. Compared to diversified benchmarks, this allocation lacks balance. Introducing fixed-income securities or other asset classes could provide stability and reduce risk. Diversifying across asset classes is a key strategy to manage risk and achieve more consistent returns.

Sectors Info

  • Technology
    35%
  • Consumer Discretionary
    11%
  • Financials
    11%
  • Telecommunications
    10%
  • Health Care
    10%
  • Industrials
    7%
  • Consumer Staples
    6%
  • Energy
    3%
  • Utilities
    2%
  • Real Estate
    2%
  • Basic Materials
    2%

The portfolio shows a high concentration in the technology sector, representing over 35% of the allocation. While tech investments have been lucrative, this concentration can lead to increased volatility, especially during periods of market correction or regulatory changes. A more balanced sector allocation, similar to common benchmarks, could mitigate sector-specific risks. Consider diversifying into underrepresented sectors to enhance stability and long-term performance.

Regions Info

  • North America
    96%
  • Europe Developed
    2%
  • Asia Emerging
    1%
  • Japan
    1%

With over 96% of assets in North America, the portfolio is heavily concentrated geographically. This limited exposure to international markets can reduce diversification benefits and increase vulnerability to regional economic downturns. Common benchmarks typically include a more global allocation. Expanding investments into other regions could provide growth opportunities and hedge against local market risks. Consider adding international equities to achieve a more balanced geographic exposure.

Redundant positions Info

  • Vanguard S&P 500 ETF
    Vanguard Total World Stock Index Fund ETF Shares
    Vanguard Total Stock Market Index Fund ETF Shares
    High correlation

The portfolio contains highly correlated assets, particularly among the Vanguard ETFs. This correlation suggests that these assets tend to move in tandem, which can limit diversification benefits during market downturns. Reducing overlap by incorporating less correlated investments can enhance risk management. Consider exploring alternative ETFs or asset classes that offer lower correlation to the existing holdings, thereby improving the portfolio's resilience.

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.

Before optimizing the portfolio using the Efficient Frontier, it's essential to address the high correlation among current assets. The Efficient Frontier aims to optimize the risk-return ratio based on existing assets. By reducing overlap and incorporating less correlated investments, the portfolio can achieve a more efficient allocation. This approach helps in maintaining the desired risk level while potentially enhancing returns.

Dividends Info

  • Invesco NASDAQ 100 ETF 0.60%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total World Stock Index Fund ETF Shares 1.90%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.20%
  • Weighted yield (per year) 1.15%

The portfolio's dividend yield stands at 1.15%, which is modest for an equity-focused portfolio. While dividends can provide a steady income stream, the current yield may not significantly contribute to overall returns. For investors seeking income, exploring higher-yielding assets or dividend-focused strategies might be beneficial. However, it's important to balance yield with growth potential to maintain a well-rounded portfolio.

Ongoing product costs Info

  • Invesco NASDAQ 100 ETF 0.15%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total World Stock Index Fund ETF Shares 0.07%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Weighted costs total (per year) 0.06%

The total expense ratio (TER) of the portfolio is impressively low at 0.06%, which supports better long-term returns by minimizing costs. This cost efficiency aligns well with best practices in portfolio management. Keeping expenses low is crucial for maximizing net returns over time. Continue monitoring costs and consider substituting any high-fee assets with more cost-effective alternatives to maintain this advantage.

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