S&P 500 ETF-focused portfolio with strong historical performance but limited diversification

Report created on Mar 28, 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 S&P 500 ETF, representing a 100% allocation to U.S. large-cap stocks. This concentrated approach aligns with the S&P 500 index, which consists of 500 leading companies in the U.S. While this offers exposure to a broad range of industries, it lacks diversification across asset classes and geographic regions. A balanced portfolio typically includes a mix of stocks, bonds, and other assets. To enhance diversification, you might consider adding other asset classes such as international equities or bonds, which can provide stability and reduce risk.

Growth Info

The portfolio's historical performance is impressive, with a Compound Annual Growth Rate (CAGR) of 13.53%. This indicates strong growth over time, significantly outpacing many other investment options. However, it's important to remember that past performance does not guarantee future results. The maximum drawdown of -34.02% highlights potential volatility, which investors should be prepared for. To mitigate this, consider diversifying your investments or implementing risk management strategies to protect against large losses during market downturns.

Projection Info

Monte Carlo simulations project potential future outcomes by analyzing historical data. With 1,000 simulations, this portfolio shows a strong potential for growth, with a 50th percentile outcome of 480.8% and a 67th percentile of 665.4%. However, these projections are not certainties and depend on various assumptions. The high percentage of simulations with positive returns (998 out of 1,000) suggests a favorable outlook, but it's crucial to maintain a diversified approach to manage risk and account for unforeseen market changes.

Asset classes Info

  • Stocks
    100%

The portfolio's allocation is entirely in stocks, with no exposure to bonds or other asset classes. While this can lead to higher potential returns, it also increases risk due to lack of diversification. In comparison, a balanced portfolio might include bonds, which can provide income and stability during market downturns. To improve diversification, consider incorporating different asset classes like bonds or real estate, which can help manage risk and provide a more stable return over time.

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 sector allocation is heavily weighted towards technology (32%), followed by financial services (14%) and consumer cyclicals (12%). This concentration in tech may lead to higher volatility, especially during interest rate hikes or tech sector downturns. While the sector composition aligns with the S&P 500, consider whether this concentration matches your risk tolerance. Diversifying into sectors with lower weights, such as utilities or basic materials, can help balance sector-specific risks and enhance overall portfolio stability.

Regions Info

  • North America
    99%
  • Europe Developed
    1%

The portfolio's geographic exposure is predominantly in North America (99%), with minimal allocation to Europe Developed (1%). This lack of international diversification may expose you to risks specific to the U.S. market. While the U.S. has been a strong performer, global diversification can provide exposure to different economic cycles and growth opportunities. Consider adding international equities to your portfolio to reduce potential U.S. market risk and capture growth in other regions.

Market capitalization Info

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

The portfolio's market capitalization is skewed towards mega-cap (47%) and big-cap (35%) stocks, with minimal exposure to medium (18%) and small-cap (1%) stocks. This concentration in larger companies offers stability but may limit potential growth from smaller, more dynamic companies. Including small and mid-cap stocks in your portfolio can enhance diversification and provide exposure to companies with higher growth potential, albeit with increased volatility.

Dividends Info

  • Vanguard S&P 500 ETF 1.00%
  • Weighted yield (per year) 1.00%

The portfolio's dividend yield is 1.00%, reflecting the income generated by the Vanguard S&P 500 ETF. While dividends can provide a steady income stream, the yield is relatively low compared to other income-focused investments. If income generation is a priority, consider incorporating dividend-focused stocks or funds into your portfolio. These can offer higher yields and complement growth-oriented investments, providing a balanced approach to both income and capital appreciation.

Ongoing product costs Info

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

The portfolio's costs are impressively low, with a Total Expense Ratio (TER) of 0.03%. This low-cost structure is beneficial for long-term performance, as it minimizes the drag on returns. Keeping costs low is a critical component of successful investing, allowing more of your investment to compound over time. While the current costs are optimal, regularly reviewing and comparing fees across investments can ensure they remain competitive and aligned with your financial goals.

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