High concentration in large-cap U.S. equities with minimal diversification and a growth focus
Report created on Feb 1, 2025Risk profile
5/7
Diversification profile
2/5
Positions
-
OG JPMORGAN EQUITY INDEX FUND CLASS R6
OGFAX - US4812C22134 99.00% -
VO Vanguard S&P 500 ETF
VOO - US9229083632 1.00%
The portfolio is overwhelmingly concentrated, with 99% invested in the JPMorgan Equity Index Fund Class R6 and 1% in the Vanguard S&P 500 ETF. This composition lacks diversification, as it is heavily reliant on a single fund. A well-diversified portfolio typically includes a mix of asset classes, sectors, and regions to spread risk. To enhance diversification, consider incorporating additional funds or ETFs that cover different asset classes, such as bonds, or different geographic regions, like emerging markets.
Growth
Historically, the portfolio has shown strong performance with a Compound Annual Growth Rate (CAGR) of 14.30%. This suggests robust growth, but it's important to note that past performance does not guarantee future results. The maximum drawdown of -33.75% highlights potential volatility. Comparing this to a benchmark like the S&P 500 can give additional context. While the historical returns are impressive, consider whether the risk level aligns with your long-term financial goals.
Projection
Using Monte Carlo simulations, which project future outcomes based on historical data, the portfolio shows a median expected return of 607.1%. While this suggests potential for significant growth, it's crucial to remember that these projections are based on historical trends and assumptions. The simulations indicate a high likelihood of positive returns, but they can't predict future market conditions. Consider whether the projected returns align with your risk tolerance and investment objectives.
Asset classes
- Stocks 100%
The portfolio is entirely composed of stocks, lacking exposure to other asset classes like bonds or real estate. This single asset class focus means the portfolio may be more susceptible to stock market volatility. Diversifying across asset classes can help mitigate risk and provide more stable returns. Consider adding fixed income or alternative investments to balance the stock-heavy allocation and potentially smooth out returns during market downturns.
Sectors
- Technology 34%
- Financials 13%
- Consumer Discretionary 11%
- Health Care 10%
- Telecommunications 9%
- Industrials 7%
- Consumer Staples 6%
- Energy 3%
- Utilities 3%
- Real Estate 2%
- Basic Materials 2%
The portfolio is concentrated in the technology sector, which comprises 34% of the investments. While tech has driven growth, it can be volatile, especially during interest rate changes. Other sectors like financial services and consumer cyclical also have notable allocations. Balancing sector exposure can reduce risk and enhance stability. Consider diversifying into underrepresented sectors to mitigate the impact of sector-specific downturns.
Regions
- North America 99%
- Europe Developed 1%
Geographically, the portfolio is heavily skewed towards North America, with 99% of assets allocated there. This lack of international exposure can limit diversification and increase vulnerability to region-specific risks. Global diversification can reduce risk by spreading investments across different economic environments. Consider increasing exposure to international markets, including emerging economies, to capture growth opportunities and enhance diversification.
Market capitalization
- Mega-cap 47%
- Large-cap 35%
- Mid-cap 18%
- Small-cap 1%
The portfolio is predominantly invested in mega and large-cap stocks, with 82% of assets in these categories. While large-cap stocks offer stability and established growth, they may limit exposure to the higher growth potential of small and mid-cap companies. Diversifying market capitalization can enhance growth prospects and reduce risk. Consider incorporating more mid and small-cap stocks to capture potential upside and diversify risk.
Redundant positions
-
High correlationVanguard S&P 500 ETFJPMORGAN EQUITY INDEX FUND CLASS R6
The assets in the portfolio, namely the JPMorgan Equity Index Fund and Vanguard S&P 500 ETF, are highly correlated. This means they tend to move in the same direction, limiting diversification benefits. During market downturns, highly correlated assets may not provide the desired risk mitigation. To improve diversification, consider adding assets with lower correlation, such as international equities or bonds, to reduce overall portfolio risk.
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 portfolio could be optimized using the Efficient Frontier, which helps identify the best risk-return ratio. The current portfolio's expected return is slightly below the optimal portfolio's expected return of 15.54%. Optimizing involves reallocating existing assets to achieve a better balance of risk and return. Consider adjusting the asset allocation to move closer to the Efficient Frontier, potentially enhancing returns without increasing risk.
Dividends
- JPMORGAN EQUITY INDEX FUND CLASS R6 0.90%
- Vanguard S&P 500 ETF 1.20%
- Weighted yield (per year) 0.90%
The portfolio's dividend yield is modest at 0.90%, with the Vanguard S&P 500 ETF contributing slightly more at 1.20%. Dividends can provide a steady income stream and contribute to total returns, especially in volatile markets. For investors seeking income, consider increasing exposure to dividend-paying stocks or funds. This can enhance cash flow and provide a buffer during periods of market uncertainty.
Ongoing product costs
- JPMORGAN EQUITY INDEX FUND CLASS R6 0.04%
- Vanguard S&P 500 ETF 0.03%
- Weighted costs total (per year) 0.04%
The portfolio benefits from low costs, with a Total Expense Ratio (TER) of 0.04%. Low fees are advantageous as they allow more of the investment returns to be retained. This cost efficiency supports better long-term performance, aligning with best practices for minimizing investment expenses. Continue to monitor and manage costs to ensure they remain low, as this can significantly impact net returns over time.
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