This portfolio has only about 10 years of historical data, based on the youngest asset in the portfolio. Some metrics, projections, and AI insights may be less reliable and should be interpreted with caution.

Balanced Risk with Low Diversity and Heavy S&P 500 Focus

Report created on Jul 24, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

The portfolio is entirely invested in the Vanguard S&P 500 ETF, which means it heavily relies on the performance of the top 500 companies in the U.S. stock market. This lack of diversification means the portfolio is subject to the ups and downs of the U.S. economy and stock market. While it benefits from the stability and growth of large-cap U.S. companies, it is also exposed to sector-specific risks and lacks exposure to other asset classes. To improve diversification, consider adding different asset classes or geographic regions.

Growth Info

Historically, the portfolio has shown strong performance with a CAGR of 12.94%, reflecting the robust growth of the S&P 500. However, it also experienced a significant maximum drawdown of -33.99%, indicating vulnerability during market downturns. This performance is typical for a portfolio heavily weighted in large-cap U.S. stocks. While the returns are impressive, the volatility can be concerning for risk-averse investors. To mitigate this risk, consider incorporating more defensive assets or diversifying into other markets.

Projection Info

Using a Monte-Carlo simulation with 1,000 iterations, the portfolio's future performance was projected. The 5th percentile result was 109.48%, while the median (50th percentile) was 512.35%, and the 67th percentile was 697.37%. This simulation assumes a hypothetical initial investment and shows a wide range of potential outcomes, reflecting market volatility. The high annualized return of 14.97% across all simulations is promising but underscores the importance of preparing for various market conditions. Diversifying the portfolio could help smooth out these potential fluctuations.

Asset classes Info

  • Stocks
    100%

The portfolio is almost entirely composed of stocks, with a negligible amount of cash. This high concentration in equities means the portfolio is positioned for growth, but it also comes with higher risk. The lack of bonds or other fixed-income securities reduces the portfolio's ability to cushion against market downturns. To create a more balanced risk profile, consider adding bonds or other fixed-income assets to the mix. This can help stabilize returns and provide some protection during periods of market stress.

Sectors Info

  • Technology
    31%
  • Financials
    13%
  • Health Care
    12%
  • Consumer Discretionary
    11%
  • Telecommunications
    9%
  • Industrials
    8%
  • Consumer Staples
    6%
  • Energy
    4%
  • Real Estate
    2%
  • Utilities
    2%
  • Basic Materials
    2%

The portfolio's sector allocation is heavily skewed towards technology (30.60%), followed by financial services (12.66%) and healthcare (12.46%). While these sectors have been strong performers, this concentration increases the portfolio's exposure to sector-specific risks. Other sectors like energy, utilities, and basic materials have minimal representation. A more balanced sector allocation could help mitigate the risk of underperformance in any single sector. Consider diversifying into sectors that are currently underrepresented to achieve a more stable performance.

Regions Info

  • North America
    99%
  • Europe Developed
    1%

Geographically, the portfolio is overwhelmingly concentrated in North America (99.43%), with minimal exposure to Europe Developed (0.53%) and Asia Developed (0.04%). This lack of geographic diversification means the portfolio is highly dependent on the U.S. economy and market conditions. To reduce this geographic risk, consider adding international equities or funds that focus on other regions. This can help spread risk and take advantage of growth opportunities in different parts of the world.

Dividends Info

  • Vanguard S&P 500 ETF 1.30%
  • Weighted yield (per year) 1.30%

The Vanguard S&P 500 ETF provides dividends, which can be a source of passive income. However, the portfolio's heavy reliance on this single ETF means the dividend yield is subject to the performance of the S&P 500 companies. While dividends can provide some income stability, a more diversified approach could enhance overall yield and reduce dependency on U.S. large-cap stocks. Consider incorporating dividend-focused funds or stocks from various sectors and regions to improve income stability.

Ongoing product costs Info

  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.03%

The portfolio benefits from very low costs, with a total expense ratio (TER) of just 0.03%. This is a significant advantage as lower costs can enhance net returns over time. However, the focus on cost-efficiency should not come at the expense of diversification. While keeping costs low is important, it is equally crucial to ensure the portfolio is well-diversified to manage risk effectively. Consider balancing low-cost investments with a diversified asset allocation to optimize both cost and risk.

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