A single ETF portfolio with a strong focus on US equities and low diversification

Report created on Jan 20, 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 is fully composed of the Vanguard Total Stock Market Index Fund ETF, representing a 100% allocation to US stocks. While this ETF provides broad exposure to the US market, the lack of diversification across different asset types could pose a risk. Typically, a balanced portfolio includes a mix of stocks, bonds, and possibly other assets to manage risk. By focusing solely on one ETF, the portfolio may be more susceptible to market volatility. Consider gradually incorporating other asset classes to enhance diversification and potentially reduce risk.

Growth Info

The portfolio has shown strong historical performance, with a Compound Annual Growth Rate (CAGR) of 13.69%. This impressive growth indicates the potential for high returns, but it also comes with a maximum drawdown of nearly 35%, highlighting significant volatility. Historical performance can provide insights, but it's crucial to remember that past performance does not guarantee future results. Comparing these figures to a benchmark can help assess relative performance. To manage risk, consider strategies that might reduce drawdowns, such as diversifying across additional asset classes.

Projection Info

The Monte Carlo simulation projects future outcomes based on historical data, with the median outcome suggesting a 471.5% increase over the period. While 997 of the simulations showed positive returns, it's important to note that such simulations rely heavily on past data, which may not predict future market conditions. The wide range between the 5th and 67th percentiles highlights potential volatility. To better prepare for future uncertainty, consider adjusting the portfolio to include assets that might perform well in different economic scenarios.

Asset classes Info

  • Stocks
    100%

The portfolio's asset allocation is entirely in stocks, which can drive high returns but also increases exposure to market volatility. In comparison, a balanced portfolio might include bonds or other asset classes for stability. This singular focus on equities could lead to higher risk during market downturns. To align with a more diversified benchmark, consider incorporating other asset classes, such as fixed income or real estate, to potentially stabilize returns and mitigate risk.

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 sector allocation is heavily weighted towards technology at 32%, followed by financial services and consumer cyclicals. This concentration could result in higher volatility, especially if these sectors face downturns. While technology has driven significant growth, it's important to consider the implications of such concentration. Balancing sector exposure can help manage risk and capture opportunities across different economic conditions. Consider gradually adjusting allocations to underrepresented sectors to enhance stability.

Regions Info

  • North America
    100%

The portfolio is entirely invested in North America, lacking international diversification. This geographic concentration means the portfolio is heavily reliant on the US economy. While the US market has performed well historically, diversifying into other regions could reduce risk and capture growth opportunities elsewhere. Consider adding exposure to developed and emerging markets to enhance geographic diversification and potentially improve risk-adjusted returns.

Market capitalization Info

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

The portfolio covers a range of market capitalizations, with a significant focus on mega and large-cap stocks. This distribution can provide stability due to the established nature of these companies. However, the minimal exposure to small and micro-cap stocks might limit potential growth opportunities. Including a broader range of market capitalizations can enhance diversification and potentially boost returns. Consider gradually increasing exposure to smaller-cap stocks to achieve a more balanced market cap distribution.

Dividends Info

  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Weighted yield (per year) 1.30%

The portfolio's dividend yield stands at 1.30%, which contributes to total returns but is relatively modest. Dividends can provide a steady income stream, especially in volatile markets. However, the focus on a single ETF limits the potential for higher dividend yields that might be available from other assets. For investors seeking income, consider exploring options with higher dividend yields or incorporating dividend-focused strategies to potentially enhance cash flow.

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 efficiency is impressive, with a Total Expense Ratio (TER) of just 0.03%. Low costs are beneficial for long-term performance, as they minimize the drag on returns. This aligns well with best practices in portfolio management. While the cost structure is optimal, it's important to ensure that low costs don't come at the expense of diversification. Continue to monitor the cost-effectiveness of any additional investments as you consider diversification options.

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