Balanced Risk and Low Diversity Portfolio Heavily Allocated in Vanguard S&P 500 ETF

Report created on Dec 2, 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 consists entirely of the Vanguard S&P 500 ETF, making up 100% of the investment. This ETF covers a wide range of sectors within the US stock market but lacks diversification across different asset classes. Having a single ETF simplifies management and keeps costs low, but it also increases exposure to market-specific risks. Diversifying into other asset classes like bonds or international stocks could help mitigate these risks and offer more balanced exposure.

Growth Info

Historically, the portfolio has performed well, with a compound annual growth rate (CAGR) of 14.12%. A hypothetical initial investment would have experienced significant growth over time, although it faced a maximum drawdown of -34.0%. This indicates that while the portfolio can generate strong returns, it is also susceptible to market volatility. It's essential to weigh the potential for high returns against the risk of substantial losses and consider if this aligns with personal financial goals.

Projection Info

Using a Monte Carlo simulation with 1,000 iterations, the forward projection shows a range of potential outcomes for a hypothetical initial investment. The 5th percentile result is 89.07%, while the 50th percentile is 518.16%, and the 67th is 731.44%. These projections highlight the uncertainty and variability of future returns. Monte Carlo simulations provide valuable insights into potential outcomes, helping investors understand possible risks and rewards, though they cannot predict exact future performance.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily weighted in stocks, accounting for approximately 99.92% of the allocation, with a negligible amount in cash. This concentration in equities suggests a focus on growth but also exposes the portfolio to stock market volatility. To manage risk, incorporating other asset classes like bonds or real estate could provide a more stable and diversified investment approach, potentially smoothing out returns during market downturns.

Sectors Info

  • Technology
    33%
  • Financials
    13%
  • Health Care
    11%
  • Consumer Discretionary
    10%
  • Telecommunications
    9%
  • Industrials
    8%
  • Consumer Staples
    6%
  • Energy
    3%
  • Utilities
    3%
  • Real Estate
    2%
  • Basic Materials
    2%

Sector allocation within the portfolio is diverse, with technology leading at 33.02%, followed by financial services and healthcare. While this diversification across sectors within the S&P 500 ETF provides some risk mitigation, it's crucial to note that sector performance can be cyclical. Being aware of sector trends and potential overexposure is important. Balancing sector allocations can help manage risk and capitalize on different economic cycles.

Regions Info

  • North America
    99%
  • Europe Developed
    1%

Geographically, the portfolio is overwhelmingly concentrated in North America, with 99.399% of assets based there. This focus on the US market means the portfolio is heavily influenced by the US economy's performance. While the US market has historically been strong, global diversification could reduce region-specific risks and provide exposure to growth opportunities in other parts of the world.

Dividends Info

  • Vanguard S&P 500 ETF 1.20%
  • Weighted yield (per year) 1.20%

The portfolio's dividend yield is 1.2%, derived from the Vanguard S&P 500 ETF. While this provides some income, it's relatively modest compared to other potential investments. For those seeking higher income, exploring other dividend-focused assets or funds could be beneficial. However, it's essential to balance the pursuit of income with the overall risk and growth objectives of the portfolio.

Ongoing product costs Info

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

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