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

Report created on Apr 6, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

This portfolio is heavily concentrated in the Vanguard S&P 500 ETF, which comprises 85.3% of the total allocation. The remaining assets are spread across four other ETFs, with only minor allocations to bonds and non-US equities. This structure leans towards a high exposure to US large-cap stocks, aligning closely with the S&P 500 index. A more balanced allocation could be achieved by increasing exposure to non-US markets or other asset classes, potentially enhancing diversification and reducing risk.

Growth Info

The portfolio has demonstrated a robust historical performance with a Compound Annual Growth Rate (CAGR) of 11.43%. This growth rate outpaces many traditional investment benchmarks, reflecting the strong performance of US equities over recent years. However, a maximum drawdown of -33.82% indicates significant volatility during downturns. Investors should be prepared for such fluctuations and consider whether they align with their risk tolerance and long-term investment goals.

Projection Info

Using a Monte Carlo simulation, this portfolio's future performance was projected with 1,000 scenarios. The median outcome suggests a potential growth of 113%, while the 5th percentile indicates a possible decline of -22.6%. These projections rely on historical data and do not guarantee future results. The simulation highlights the inherent uncertainty in the market, underscoring the importance of maintaining a diversified portfolio to mitigate risks and capture potential upside.

Asset classes Info

  • Stocks
    99%
  • Bonds
    1%

This portfolio is heavily skewed towards equities, with 99% allocated to stocks and only 1% to bonds. Such a concentration in equities can lead to higher potential returns but also greater risk, particularly during market downturns. Diversifying into other asset classes, such as bonds or real estate, could help stabilize returns and provide a buffer against stock market volatility. Investors might consider adjusting the asset class distribution to better align with their risk tolerance and investment objectives.

Sectors Info

  • Technology
    29%
  • Financials
    14%
  • Health Care
    12%
  • Consumer Discretionary
    11%
  • Telecommunications
    9%
  • Industrials
    8%
  • Consumer Staples
    5%
  • Energy
    3%
  • Utilities
    2%
  • Basic Materials
    2%
  • Real Estate
    2%

The portfolio's sector allocation is concentrated in technology (29%), financial services (14%), and healthcare (12%). This concentration reflects the composition of the S&P 500, which may lead to higher volatility, especially if these sectors face downturns. While these sectors have driven recent market gains, investors should be mindful of potential sector-specific risks. A more balanced sector allocation could be achieved by increasing exposure to underrepresented sectors, potentially enhancing stability and reducing sector-specific risks.

Regions Info

  • North America
    90%
  • Europe Developed
    4%
  • Asia Emerging
    2%
  • Japan
    1%
  • Asia Developed
    1%

With 90% of the portfolio's assets allocated to North America, there is limited geographic diversification. This concentration exposes the portfolio to regional economic and political risks. Expanding geographic exposure, particularly in emerging markets or other developed regions, could provide diversification benefits and reduce reliance on the US market. While the US market has been strong, global diversification can help capture growth opportunities in other regions and mitigate regional risks.

Market capitalization Info

  • Mega-cap
    45%
  • Large-cap
    34%
  • Mid-cap
    18%
  • Small-cap
    2%
  • Micro-cap
    1%

The portfolio is primarily invested in mega-cap (45%) and big-cap (34%) companies, with minimal exposure to small (2%) and micro (1%) caps. This focus on larger companies can provide stability and liquidity but may limit exposure to high-growth opportunities often found in smaller firms. Diversifying into mid and small-cap stocks could enhance growth potential and provide a more balanced risk profile. Investors should assess whether their current market capitalization exposure aligns with their investment goals.

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.

The current portfolio composition could be optimized for risk versus return using the Efficient Frontier, which identifies the best possible risk-return ratio for a given set of assets. By adjusting allocations among existing assets, investors might achieve a more efficient balance, potentially enhancing returns without increasing risk. It's important to note that optimization is based on historical data and does not guarantee future results. Regular reviews and adjustments can help maintain an optimal portfolio alignment.

Dividends Info

  • Vanguard Long-Term Bond Index Fund ETF Shares 3.70%
  • Vanguard FTSE Developed Markets Index Fund ETF Shares 3.10%
  • Vanguard Health Care Index Fund ETF Shares 1.20%
  • Vanguard S&P 500 ETF 1.40%
  • Vanguard FTSE Emerging Markets Index Fund ETF Shares 3.20%
  • Vanguard Extended Market Index Fund ETF Shares 1.00%
  • Weighted yield (per year) 1.56%

The portfolio's dividend yield is 1.56%, with the highest yield coming from the Vanguard Long-Term Bond Index Fund ETF Shares at 3.70%. While dividends contribute to total returns, the current yield is modest, reflecting the growth-oriented nature of the portfolio. Investors seeking income may consider increasing allocations to higher-yielding assets or funds. However, it's important to balance income needs with growth objectives to ensure the portfolio aligns with overall investment goals.

Ongoing product costs Info

  • Vanguard Long-Term Bond Index Fund ETF Shares 0.04%
  • Vanguard FTSE Developed Markets Index Fund ETF Shares 0.05%
  • Vanguard Health Care Index Fund ETF Shares 0.10%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard FTSE Emerging Markets Index Fund ETF Shares 0.08%
  • Vanguard Extended Market Index Fund ETF Shares 0.06%
  • Weighted costs total (per year) 0.04%

The portfolio's total expense ratio (TER) is impressively low at 0.04%, reflecting the cost-efficiency of the Vanguard ETFs. Low costs are a significant advantage, as they enhance long-term returns by minimizing the drag on performance. Investors should continue to monitor expense ratios and consider cost-effective options when rebalancing or adjusting the portfolio. Maintaining a focus on low-cost investments will support better performance over time without sacrificing quality or diversification.

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