A concentrated US-focused portfolio with strong past performance but limited diversification

Report created on Jan 24, 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 consists entirely of the Vanguard S&P 500 UCITS Acc ETF, which represents 100% of the allocation. The portfolio's composition is focused solely on large-cap US equities, which is typical for an S&P 500-based investment. While this provides exposure to some of the largest and most successful companies in the US, it lacks diversification across different asset classes. Diversifying into other asset types, such as bonds or international equities, could reduce risk and potentially improve stability. Consider balancing the portfolio with a mix of asset classes to align better with a balanced risk profile.

Growth Info

Historically, this portfolio has shown impressive performance, with a Compound Annual Growth Rate (CAGR) of 16.24%. This growth rate indicates strong returns compared to many other investment options. However, it's important to note the maximum drawdown of -33.68%, which reflects the potential for significant losses during market downturns. While past performance provides valuable insights, it doesn't guarantee future results. To mitigate potential risks, consider strategies that protect against large drawdowns, such as incorporating defensive assets or setting stop-loss orders.

Projection Info

Forward projections using Monte Carlo simulations suggest a wide range of potential outcomes. With 1,000 simulations, the 5th percentile shows a 148.3% end value, while the 67th percentile reaches 986.3%. The median outcome is a 707.0% increase, indicating a generally positive outlook. However, these projections rely on historical data and assumptions, which may not account for future market changes. While the annualized return of 17.28% across simulations is promising, it's crucial to remain cautious and adaptable to unforeseen market shifts. Regularly reviewing and adjusting the portfolio can help maintain alignment with financial goals.

Asset classes Info

  • Stocks
    100%

The portfolio is entirely composed of stocks, which limits diversification across asset classes. While equities offer growth potential, they also come with higher volatility. A more balanced portfolio might include bonds, real estate, or commodities to provide stability and reduce risk. Diversifying across asset classes can help cushion against market fluctuations, providing a smoother investment journey. Consider gradually introducing other asset classes to enhance diversification, aligning with a balanced risk profile and long-term financial objectives.

Sectors Info

  • 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 sector allocation is concentrated, with technology making up 34% of the portfolio. This heavy tech weighting can lead to increased volatility, especially during periods of rising interest rates or regulatory changes. Financial services and consumer cyclicals also have significant representation. While these sectors have driven recent growth, reliance on a few sectors increases risk. To enhance stability, consider diversifying across a broader range of sectors. This approach can help mitigate sector-specific risks and align the portfolio more closely with diversified benchmarks.

Regions Info

  • North America
    99%
  • Europe Developed
    1%

The portfolio's geographic allocation is overwhelmingly focused on North America, with 99% exposure. This concentration limits international diversification and exposes the portfolio to risks specific to the US market. While the US has historically been a strong performer, global diversification can provide exposure to different economic cycles and growth opportunities. Introducing assets from Europe, Asia, and emerging markets could enhance diversification, reducing reliance on a single region and potentially improving risk-adjusted returns.

Market capitalization Info

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

The portfolio is heavily tilted towards mega-cap stocks, with 47% in this category. Big and medium caps also have substantial allocations, while small caps are underrepresented. This skew towards larger companies can provide stability but may limit exposure to the growth potential of smaller firms. Including a more balanced mix of market capitalizations can enhance diversification and capture opportunities across different company sizes. Consider adding small- and mid-cap stocks to achieve a more comprehensive market exposure.

Ongoing product costs Info

  • Vanguard S&P 500 UCITS Acc 0.07%
  • Weighted costs total (per year) 0.07%

The portfolio's costs are impressively low, with a Total Expense Ratio (TER) of 0.07% for the Vanguard S&P 500 UCITS Acc ETF. Low costs are beneficial as they help improve net returns over the long term. Keeping expenses minimal is a smart strategy, allowing more of the investment's growth to benefit the investor. While the current cost structure is efficient, it's always wise to periodically review and compare costs with other investment options to ensure ongoing cost-effectiveness.

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