A concentrated US equity portfolio with strong historic growth but limited global diversification

Report created on Jan 25, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

The portfolio is entirely invested in the Vanguard US Total Market ETF, representing a singular asset class focused on US equities. This heavy concentration in one ETF limits diversification, which can increase risk since all investments are tied to the performance of the US market. Typically, a diversified portfolio includes various asset classes like bonds or international equities to spread risk. Consider adding other asset types to balance potential volatility and enhance stability. A more diversified approach could align better with a balanced risk profile, offering a cushion during market downturns.

Growth Info

Historically, the portfolio has performed impressively with a CAGR of 14.56%, indicating strong growth over time. This measure, which shows average annual return, is akin to calculating a car's speed over a long trip. However, the maximum drawdown of -28.18% highlights significant volatility, meaning the portfolio has experienced steep declines. Comparing this to a benchmark can provide context, but remember that past performance is not a future guarantee. Consider balancing high growth potential with investments that can mitigate such downturns for a smoother ride.

Projection Info

Monte Carlo simulations, which use historical data to predict future outcomes, suggest a wide range of potential returns. The median projection shows a 569.4% increase, but outcomes vary significantly. This method is like forecasting weather using past patterns, and while informative, it doesn't guarantee results. The portfolio's high annualized return of 15.49% across simulations is promising, yet the reliance on historical data implies inherent uncertainties. It's wise to prepare for various scenarios, ensuring the portfolio can withstand different market conditions.

Asset classes Info

  • US Equity
    99%

With 99% of the portfolio in US equities, diversification across asset classes is minimal. Typically, a balanced portfolio includes a mix of equities, bonds, and other assets to spread risk. This concentration can lead to higher volatility, as the entire portfolio is subject to the US stock market's fluctuations. To enhance diversification, consider incorporating other asset classes, such as fixed income or international equities, which can provide stability and reduce overall risk, aligning with a balanced investment approach.

Sectors Info

  • Technology
    31%
  • Financials
    14%
  • Consumer Discretionary
    11%
  • Health Care
    11%
  • Industrials
    9%
  • Telecommunications
    8%
  • Consumer Staples
    5%
  • Energy
    4%
  • Real Estate
    3%
  • Utilities
    3%
  • Basic Materials
    2%

The portfolio is heavily weighted towards the technology sector, comprising 31% of its allocation. While this sector has driven growth, it also introduces volatility, especially during economic shifts. Other sectors like financial services and consumer cyclicals offer some balance, but the overall sector diversification is limited. A more even distribution across sectors can mitigate risks associated with sector-specific downturns. Evaluating sector trends and adjusting allocations could enhance resilience and align better with a balanced risk profile.

Regions Info

  • North America
    100%

Geographically, the portfolio is entirely concentrated in North America, with no exposure to international markets. This lack of global diversification can increase vulnerability to regional economic downturns. A more geographically diverse portfolio typically includes allocations to Europe, Asia, and emerging markets, which can provide growth opportunities and risk mitigation. Consider expanding geographic exposure to reduce reliance on the North American market and enhance overall diversification, aligning with a balanced investment strategy.

Market capitalization Info

  • Mega-cap
    41%
  • Large-cap
    31%
  • Mid-cap
    20%
  • Small-cap
    6%
  • Micro-cap
    2%

The portfolio's market capitalization is skewed towards mega and big-cap stocks, comprising 72% of the allocation. While these companies offer stability and are less volatile, the limited exposure to small and micro-cap stocks reduces growth potential. A balanced approach typically includes a mix of different market caps to capture growth opportunities and spread risk. Consider adjusting the allocation to include more small and mid-cap stocks, which can provide diversification and potential for higher returns.

Dividends Info

  • Vanguard US Total Market 0.50%
  • Weighted yield (per year) 0.50%

The Vanguard US Total Market ETF offers a modest dividend yield of 0.50%, contributing to overall returns. While dividends provide a steady income stream, the yield is relatively low, emphasizing growth over income. For investors seeking income, higher-yielding assets could be considered. However, for those prioritizing growth, this yield aligns with the portfolio's focus. Balancing growth and income through dividend-paying investments can enhance total returns and provide additional stability.

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