A balanced portfolio with high concentration in US large-cap equities
Report created on Mar 24, 2025Risk profile
4/7
Diversification profile
2/5
Positions
-
SP SPDR S&P 500 ETF Trust
SPY - US78462F1030 50.00% -
VO Vanguard S&P 500 ETF
VOO - US9229083632 50.00%
This portfolio is composed of two S&P 500 ETFs, each making up 50% of the total allocation. This results in a highly concentrated portfolio focused entirely on large-cap U.S. equities. While this concentration simplifies management and provides exposure to a broad range of U.S. sectors, it lacks diversification. A more diverse mix of asset types, such as bonds or international equities, could reduce risk and improve stability. Consider adding different asset classes to better align with a balanced risk profile.
Growth
Historically, the portfolio has performed well, with a CAGR of 13.65%. This performance is comparable to the S&P 500 benchmark, indicating strong returns over time. However, the max drawdown of -33.85% highlights the potential for significant losses during market downturns. This underscores the importance of diversification to mitigate such risks. Maintaining a diversified approach could help smooth returns and provide more consistent performance through varying market conditions.
Projection
Using Monte Carlo simulations, the portfolio shows a promising forward projection with an annualized return of 14.61%. Monte Carlo simulations use historical data to predict a range of potential future outcomes, offering insight into possible returns. While the median scenario suggests robust growth, it's crucial to remember that these projections rely on past data and can't guarantee future results. Regularly revisiting asset allocation can help adapt to changing market conditions and align with evolving investment goals.
Asset classes
- Stocks 100%
The portfolio is entirely invested in stocks, offering no exposure to other asset classes like bonds or real estate. This singular focus on equities increases potential returns but also heightens risk, especially during market downturns. Diversifying across asset classes can help balance risk and reward by offsetting losses in one area with gains in another. Consider incorporating bonds or alternative investments to enhance stability and potentially improve long-term returns.
Sectors
- Technology 32%
- Financials 14%
- Consumer Discretionary 11%
- Health Care 11%
- Telecommunications 10%
- Industrials 7%
- Consumer Staples 6%
- Energy 3%
- Utilities 3%
- Real Estate 2%
- Basic Materials 2%
Sector allocation is heavily weighted towards technology, making up 32% of the portfolio. This concentration can lead to increased volatility, especially if tech stocks underperform. While being tech-heavy has been advantageous in recent years, it may not always align with market trends. Balancing sector exposure can help mitigate this risk. Consider diversifying into underrepresented sectors like basic materials or real estate to achieve a more balanced sector allocation.
Regions
- North America 99%
- Europe Developed 1%
Geographically, the portfolio is overwhelmingly concentrated in North America, with 99% exposure. This lack of international diversification exposes the portfolio to regional risks, such as economic downturns or policy changes in the U.S. Expanding exposure to developed and emerging markets can provide a hedge against U.S.-specific risks and tap into growth opportunities abroad. Consider adding international equities to enhance global diversification.
Market capitalization
- Mega-cap 46%
- Large-cap 35%
- Mid-cap 18%
- Small-cap 1%
The portfolio is predominantly invested in mega and large-cap stocks, with 81% of the allocation in these categories. While large-cap stocks offer stability and lower volatility, they may limit growth potential compared to smaller companies. Including small and mid-cap stocks can introduce higher growth opportunities and further diversify risk. Assess the balance of market capitalizations to align with growth objectives and risk tolerance.
Redundant positions
-
High correlationSPDR S&P 500 ETF TrustVanguard S&P 500 ETF
The portfolio's assets are highly correlated, as both ETFs track the S&P 500 index. This correlation means that both assets are likely to move in the same direction, which limits diversification benefits. In market downturns, highly correlated assets can amplify losses. To reduce this risk, consider diversifying into less correlated assets that can provide stability and mitigate potential losses during volatile periods.
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's current structure may not be fully optimized on the Efficient Frontier, which represents the best possible risk-return trade-off. The concentration in two highly correlated assets limits diversification benefits. To optimize, consider reallocating to include a broader range of asset classes and reducing overlap. This could improve the risk-return ratio by better balancing potential gains with acceptable levels of risk.
Dividends
- SPDR S&P 500 ETF Trust 1.00%
- Vanguard S&P 500 ETF 1.00%
- Weighted yield (per year) 1.00%
The portfolio has a dividend yield of 1.00%, providing a modest income stream. While dividends contribute to total returns, the focus on large-cap U.S. equities means the yield may not be as high as other income-focused investments. For investors seeking higher income, exploring dividend-focused ETFs or stocks with higher yields could enhance cash flow. However, ensure these additions align with overall investment goals and risk tolerance.
Ongoing product costs
- SPDR S&P 500 ETF Trust 0.10%
- Vanguard S&P 500 ETF 0.03%
- Weighted costs total (per year) 0.06%
The portfolio's total expense ratio (TER) is a low 0.06%, reflecting the cost efficiency of the chosen ETFs. Lower costs mean more of the investment's returns are retained, supporting better long-term growth. This cost efficiency is a strong point and aligns with best practices for maximizing returns. Continuously monitoring costs and seeking low-cost investment options can further enhance portfolio performance over time.
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