Concentrated portfolio in SPDR S&P 500 ETF with high US exposure and tech sector focus

Report created on Jan 1, 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 entirely composed of the SPDR S&P 500 ETF Trust, representing a 100% allocation to this single asset. Such concentration means the portfolio lacks diversification, as it is heavily reliant on the performance of the S&P 500 index. Typically, balanced portfolios have a mix of asset types, such as bonds, real estate, or international stocks, to mitigate risk. While the S&P 500 offers exposure to a broad range of sectors, the lack of diversification could expose the portfolio to greater volatility. Consider diversifying by adding different asset classes to reduce risk.

Growth Info

Historically, the SPDR S&P 500 ETF has delivered a robust CAGR of 14.0%, indicating strong growth over time. However, it also experienced a significant maximum drawdown of -33.71%, highlighting potential vulnerability during market downturns. Compared to benchmarks, this performance aligns with typical S&P 500 returns, but the volatility may not suit all investors. It's important to remember that past performance doesn't guarantee future results. To manage risk, consider incorporating assets that perform differently during economic shifts to stabilize returns.

Projection Info

The Monte Carlo simulation, which uses historical data to estimate potential future outcomes, suggests a wide range of possibilities for this portfolio. With a median (50th percentile) projected return of 520.38% and a 67th percentile return of 708.48%, the outlook is optimistic. However, there's always uncertainty in predictions, as reflected by the 5th percentile return being just 99.74%. While the simulations show a high likelihood of positive returns, diversifying could help manage potential risks not captured by historical data alone.

Asset classes Info

  • Stocks
    100%

The portfolio's asset allocation is nearly entirely in stocks, with a negligible cash component. This heavy stock concentration provides potential for growth but increases exposure to market volatility. Balanced portfolios typically include bonds or other assets to cushion against stock market fluctuations. By diversifying across asset classes, you can potentially reduce risk and smooth out returns over time. Consider adding fixed income or alternative investments to achieve a more balanced risk profile.

Sectors Info

  • Technology
    34%
  • Financials
    13%
  • Consumer Discretionary
    12%
  • Health Care
    10%
  • Telecommunications
    10%
  • Industrials
    7%
  • Consumer Staples
    6%
  • Energy
    3%
  • Utilities
    2%
  • Real Estate
    2%
  • Basic Materials
    2%

The sector allocation is heavily skewed towards technology, comprising over 33% of the portfolio. While technology has been a strong performer, this concentration can lead to higher volatility, especially during periods of regulatory changes or tech sector downturns. Other sectors like financial services and consumer cyclicals also have notable allocations. For a more balanced approach, consider spreading investments across a wider range of sectors to mitigate sector-specific risks and enhance stability.

Regions Info

  • North America
    99%
  • Europe Developed
    1%

With 99.445% of the portfolio's exposure in North America, there's limited geographic diversification. This concentration increases vulnerability to regional economic downturns or policy changes. A more geographically diverse portfolio typically includes allocations to Europe, Asia, and emerging markets, which can offer growth opportunities and reduce risk. Consider incorporating international assets to capture global growth and enhance diversification.

Dividends Info

  • SPDR S&P 500 ETF Trust 0.90%
  • Weighted yield (per year) 0.90%

The SPDR S&P 500 ETF Trust provides a dividend yield of 0.9%, contributing modestly to total returns. While dividends can offer steady income, this yield is relatively low, reflecting the growth-focused nature of the portfolio. For those seeking income, consider adding higher-yielding investments, such as dividend-focused funds or real estate investment trusts (REITs), to increase cash flow and provide a more balanced return profile.

Ongoing product costs Info

  • SPDR S&P 500 ETF Trust 0.10%
  • Weighted costs total (per year) 0.10%

The portfolio benefits from a low total expense ratio (TER) of 0.1%, which is advantageous for long-term performance. Lower costs mean more of your investment returns are kept, enhancing compounding over time. This cost efficiency aligns with best practices in portfolio management. However, as diversification is considered, be mindful of any additional costs associated with new investments, aiming to keep overall expenses low.

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