A concentrated portfolio with full exposure to the S&P 500 and low diversification

Report created on Apr 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 invested in the Vanguard S&P 500 ETF, representing a 100% allocation to U.S. large-cap equities. This single asset class approach limits diversification, as all investments are tied to the performance of the S&P 500. While this provides exposure to a broad range of sectors, it also means the portfolio's returns are heavily influenced by the U.S. market's performance. To enhance diversification, consider adding other asset classes such as bonds or international equities. This can help mitigate risks associated with market downturns and provide more balanced growth opportunities.

Growth Info

Historically, the Vanguard S&P 500 ETF has delivered a strong Compound Annual Growth Rate (CAGR) of 13.33%. This reflects the robust performance of U.S. large-cap stocks over recent years. However, the portfolio experienced a maximum drawdown of -34.02%, highlighting its vulnerability during market downturns. Past performance offers insights but doesn't guarantee future results. To better withstand market volatility, consider diversifying across different asset classes or regions. This can potentially reduce the impact of significant drawdowns and provide a smoother investment experience over time.

Projection Info

A Monte Carlo simulation, which uses historical data to project future outcomes, indicates a wide range of potential returns for this portfolio. The 5th percentile shows a potential return of 81.7%, while the 67th percentile suggests a 660.4% return. This variability underscores the uncertainty of future performance. Although 993 out of 1,000 simulations yielded positive returns, this tool relies on past data, which may not predict future results. To prepare for various market conditions, consider maintaining a diversified portfolio that can adapt to changing economic environments.

Asset classes Info

  • Stocks
    100%

The portfolio's current allocation is 100% in stocks, specifically U.S. large-cap equities. This concentration in a single asset class limits diversification, exposing the portfolio to market-specific risks. While stocks can offer high returns, they also come with higher volatility. By incorporating other asset classes, such as bonds or real estate, you can potentially reduce risk and enhance stability. Diversifying across asset classes can help cushion the impact of market fluctuations and provide a more balanced risk-return profile.

Sectors Info

  • Technology
    32%
  • Financials
    14%
  • Consumer Discretionary
    12%
  • Health Care
    10%
  • Telecommunications
    10%
  • Industrials
    7%
  • Consumer Staples
    5%
  • Energy
    3%
  • Utilities
    3%
  • Real Estate
    2%
  • Basic Materials
    2%

The portfolio's sector allocation is heavily weighted towards technology (32%), followed by financial services (14%) and consumer cyclicals (12%). This concentration reflects the composition of the S&P 500, which can lead to higher volatility, especially if certain sectors underperform. A tech-heavy allocation may be particularly sensitive to changes in interest rates or regulatory shifts. To mitigate sector-specific risks, consider diversifying into sectors with different economic drivers. This can help balance the portfolio and provide more consistent performance across varying market conditions.

Regions Info

  • North America
    99%
  • Europe Developed
    1%

Geographically, the portfolio is predominantly focused on North America, with 99% exposure to this region. This heavy concentration in the U.S. market limits the benefits of geographic diversification, which can provide a buffer against regional economic downturns. By incorporating international equities, particularly from Europe or Asia, you can enhance diversification and potentially capture growth opportunities in other markets. This broader geographic exposure can help reduce regional risks and improve the portfolio's overall resilience.

Market capitalization Info

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

The portfolio is primarily invested in mega-cap (47%) and big-cap (35%) stocks, with minimal exposure to medium (18%) and small-cap (1%) equities. This skew towards larger companies can provide stability and lower volatility, as these firms typically have established market positions. However, smaller companies often offer higher growth potential. To capture a wider range of opportunities, consider increasing exposure to small and mid-cap stocks. This can enhance growth prospects and provide a more balanced market capitalization distribution.

Dividends Info

  • Vanguard S&P 500 ETF 1.40%
  • Weighted yield (per year) 1.40%

The portfolio's dividend yield is 1.40%, reflecting the income generated from the Vanguard S&P 500 ETF. While dividends can provide a steady income stream, this yield is relatively modest. For investors seeking higher income, consider incorporating dividend-focused investments or exploring other asset classes with higher yields. Balancing growth and income can enhance the portfolio's overall return potential and provide a buffer against market volatility.

Ongoing product costs Info

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

The portfolio benefits from very low costs, with a Total Expense Ratio (TER) of just 0.03% for the Vanguard S&P 500 ETF. This minimal expense ratio supports better long-term performance, as lower costs mean more of your investment returns are retained. Keeping costs low is crucial for maximizing net returns over time. However, when considering diversification, be mindful of additional expenses that other asset classes or funds might incur. Strive to maintain a cost-effective approach while enhancing portfolio diversification.

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