Highly concentrated S&P 500 ETF portfolio with low diversification and North American focus

Report created on Jun 14, 2024

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 invested in the Vanguard S&P 500 ETF, representing a single asset class of stocks. While this provides exposure to 500 leading companies across various sectors, it lacks diversification beyond large-cap U.S. equities. A balanced portfolio typically includes a mix of asset classes like bonds or international equities, which can help cushion against market volatility. To align more closely with a truly balanced profile, consider introducing additional asset classes to reduce risk and enhance diversification.

Growth Info

Historically, the Vanguard S&P 500 ETF has performed well, with a Compound Annual Growth Rate (CAGR) of 14.26%. This indicates robust growth over time, although it's important to note the significant max drawdown of -34.01%, reflecting potential volatility. Comparing this to broader benchmarks can provide context for its performance. While past performance is not indicative of future results, the historical growth suggests a strong track record. Diversifying could help mitigate the impact of such drawdowns while maintaining growth potential.

Projection Info

Using Monte Carlo simulations, which predict future outcomes based on historical data, the portfolio shows a wide range of potential returns. With a 50th percentile projection of 545.4% growth, the outlook appears positive, though variability exists. The simulations indicate a 15.45% annualized return, reinforcing the potential for substantial gains. However, remember that these projections are not guarantees and depend on historical trends continuing. Diversifying could stabilize returns and reduce reliance on a single market's performance.

Asset classes Info

  • Stocks
    100%

The portfolio's 100% allocation to stocks provides no exposure to other asset classes like bonds or real estate, which are typically included for diversification and risk management. This singular focus on equities could lead to higher volatility, especially during market downturns. A more diversified portfolio might include a mix of asset classes to balance risk and return. Consider incorporating bonds or alternative investments to create a more resilient portfolio that can better weather different market conditions.

Sectors Info

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

The sector allocation is heavily skewed towards technology at 33%, followed by financial services and consumer cyclicals. This concentration can lead to increased volatility, particularly if these sectors underperform. A more diversified sector allocation could help mitigate sector-specific risks and provide a smoother return profile. Balancing exposure across sectors like healthcare, utilities, and consumer defensive could enhance stability, especially during economic shifts that impact specific industries differently.

Regions Info

  • North America
    99%
  • Europe Developed
    1%

With 99% of the portfolio concentrated in North America, there's limited geographic diversification. This focus can expose the portfolio to region-specific risks, such as economic downturns or policy changes in the U.S. Expanding geographic exposure can reduce risk by tapping into growth opportunities in other developed and emerging markets. Consider diversifying into international equities to capture global growth and reduce dependence on the North American market.

Market capitalization Info

  • Mega-cap
    47%
  • Large-cap
    35%
  • Mid-cap
    18%
  • Small-cap
    1%

The portfolio is predominantly invested in mega and large-cap stocks, which tend to be more stable but may offer lower growth potential compared to smaller companies. While these stocks provide a solid foundation, introducing small and mid-cap stocks can enhance growth prospects. A more balanced allocation across market capitalizations could improve the risk-return profile by capturing the dynamism of smaller companies while maintaining the stability of larger ones.

Dividends Info

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

The portfolio's dividend yield stands at 1.20%, providing a modest income stream. Dividends can be an important component of total returns, especially during periods of market volatility. While the yield is relatively low, reinvesting dividends can compound returns over time. If income is a key goal, consider adding higher-yielding assets to boost the portfolio's income generation. Balancing growth with income can enhance overall portfolio performance.

Ongoing product costs Info

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

With a Total Expense Ratio (TER) of just 0.03%, the portfolio benefits from extremely low costs, which supports better long-term performance by minimizing fees. Low costs are a significant advantage, allowing more of your investment to compound over time. Maintaining this cost efficiency is crucial, as high fees can erode returns. Continue to prioritize low-cost investments to maximize net returns and enhance the portfolio's growth potential.

What next?

Ready to invest in this portfolio?

Select a broker that fits your needs and watch for low fees to maximize your returns.

Select broker

Create your own report?

Analyze your portfolio

Join our community!

Join Discord

The information provided on this platform is for informational purposes only and should not be considered as financial or investment advice. Insightfolio does not provide investment advice, personalized recommendations, or guidance regarding the purchase, holding, or sale of financial assets. The tools and content are intended for educational purposes only and are not tailored to individual circumstances, financial needs, or objectives.

Insightfolio assumes no liability for the accuracy, completeness, or reliability of the information presented. Users are solely responsible for verifying the information and making independent decisions based on their own research and careful consideration. Use of the platform should not replace consultation with qualified financial professionals.

Investments involve risks. Users should be aware that the value of investments may fluctuate and that past performance is not an indicator of future results. Investment decisions should be based on personal financial goals, risk tolerance, and independent evaluation of relevant information.

Insightfolio does not endorse or guarantee the suitability of any particular financial product, security, or strategy. Any projections, forecasts, or hypothetical scenarios presented on the platform are for illustrative purposes only and are not guarantees of future outcomes.

By accessing the services, information, or content offered by Insightfolio, users acknowledge and agree to these terms of the disclaimer. If you do not agree to these terms, please do not use our platform.

Instrument logos provided by Elbstream.

Help us improve Insightfolio

Your feedback makes a difference! Share your thoughts in our quick survey. Take the survey