Balanced portfolio with low diversification and strong historical performance but high sector concentration risk.
Report created on Aug 16, 2024Risk profile
4/7
Diversification profile
2/5
Positions
-
VT Vanguard Total Stock Market Index Fund ETF Shares
VTI - US9229087690 100.00%
The portfolio consists entirely of the Vanguard Total Stock Market Index Fund ETF, making it a low-diversity investment. This ETF provides broad exposure to the U.S. stock market, covering a wide range of sectors. However, having a single ETF means the portfolio lacks diversification across different asset classes, which can increase risk if the U.S. stock market underperforms. To improve diversification, consider adding other asset classes like bonds or international equities to balance potential risks and returns.
Growth
Historically, the portfolio has performed well with a compound annual growth rate of 13.76%. Despite the impressive growth, it experienced a maximum drawdown of -35.04%, indicating significant volatility during market downturns. This performance suggests that while the portfolio can yield high returns, it also exposes investors to considerable risk. To mitigate potential losses during market downturns, consider incorporating assets with lower volatility or diversifying into other markets.
Projection
Monte Carlo simulations, which use random sampling to model potential future outcomes, suggest a wide range of possible returns for the portfolio. With a hypothetical initial investment, the simulations show a 5th percentile return of 87.51% and a 50th percentile return of 490.64%. These projections highlight the potential for substantial growth but also underscore the uncertainty inherent in stock market investments. To manage this uncertainty, regularly review your investment strategy and adjust as needed to align with your risk tolerance.
Asset classes
- Stocks 100%
The portfolio is heavily weighted in stocks, with a small percentage in cash. This concentration in a single asset class can lead to increased risk, particularly during periods of market volatility. While stocks offer the potential for high returns, they can also experience significant fluctuations. To reduce risk, consider diversifying into other asset classes such as bonds or real estate, which can provide more stable returns and help cushion against market downturns.
Sectors
- Technology 31%
- Financials 13%
- Health Care 12%
- Consumer Discretionary 10%
- Industrials 9%
- Telecommunications 8%
- Consumer Staples 5%
- Energy 4%
- Real Estate 3%
- Utilities 3%
- Basic Materials 2%
Sector allocation within the portfolio shows a significant emphasis on technology, which makes up over 30% of the holdings. While tech stocks have driven substantial growth in recent years, this concentration increases vulnerability to sector-specific downturns. Other sectors, such as financial services and healthcare, also have notable allocations. To reduce sector risk, evaluate the potential benefits of reallocating some investments to underrepresented sectors, which may offer different growth opportunities and risk profiles.
Regions
- North America 100%
Geographically, the portfolio is almost entirely concentrated in North America, with minimal exposure to other regions. This lack of geographic diversification can be risky if the U.S. market experiences a downturn or if other regions outperform. By diversifying investments across different geographical areas, you can potentially reduce risk and take advantage of growth opportunities in emerging markets or developed economies outside North America.
Dividends
- Vanguard Total Stock Market Index Fund ETF Shares 1.20%
- Weighted yield (per year) 1.20%
The portfolio offers a modest dividend yield of 1.2%, which can provide a steady income stream. While dividends are an attractive feature, the yield is relatively low, emphasizing the portfolio's focus on growth rather than income. Investors seeking higher income may want to explore additional dividend-focused investments or consider reallocating some funds to higher-yielding assets. Balancing growth and income can help achieve a more stable financial outcome.
Ongoing product costs
- Vanguard Total Stock Market Index Fund ETF Shares 0.03%
- Weighted costs total (per year) 0.03%
The Vanguard Total Stock Market Index Fund ETF has a low expense ratio of 0.03%, making it a cost-effective choice for investors. Keeping investment costs low is crucial for maximizing net returns over time. The low expense ratio is a significant advantage of this portfolio, but it's essential to monitor any potential changes in fees or costs. Maintaining a focus on low-cost investments can significantly enhance long-term growth and overall portfolio performance.
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