A concentrated portfolio with a focus on the US market and technology sector

Report created on Dec 26, 2024

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 iShares Core S&P 500 ETF, offering a broad exposure to US large-cap stocks. This single ETF composition leads to low diversification, which can increase risk as it relies heavily on the performance of the US equity market. While S&P 500 ETFs are popular for their historical performance, diversifying across different asset types, such as bonds or international equities, could reduce risk and smooth returns over time.

Growth Info

Historically, the portfolio has shown a strong Compound Annual Growth Rate (CAGR) of 14.01%, reflecting robust past performance. However, it also experienced a significant maximum drawdown of -33.89%, indicating potential volatility. While past performance can guide expectations, it doesn't guarantee future results. Comparing this to a balanced benchmark could provide insight into potential volatility and returns in different market conditions.

Projection Info

Monte Carlo simulations, which use historical data to project potential future outcomes, suggest a wide range of possible returns. The median projection shows a 515.58% increase, but outcomes can vary significantly, with a 5th percentile of 89.44%. While the simulations show a high probability of positive returns, it's important to remember that these are based on past data and assumptions, which may not hold in the future.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily concentrated in stocks, specifically US equities, with a negligible cash component. This lack of diversification across different asset classes, such as bonds or real estate, can lead to increased risk during market downturns. A more balanced allocation could help mitigate risk and provide more stable returns over time, especially for investors seeking a balanced risk profile.

Sectors Info

  • Technology
    33%
  • Financials
    13%
  • Consumer Discretionary
    12%
  • Health Care
    10%
  • Telecommunications
    9%
  • Industrials
    7%
  • Consumer Staples
    6%
  • Energy
    3%
  • Utilities
    2%
  • Real Estate
    2%
  • Basic Materials
    2%

The portfolio is notably weighted towards the technology sector, comprising over 33% of the holdings. While tech stocks have driven significant growth in recent years, this concentration can lead to higher volatility, especially during periods of regulatory scrutiny or rising interest rates. Balancing exposure across a broader range of sectors could reduce sector-specific risks and enhance stability.

Regions Info

  • North America
    99%
  • Europe Developed
    1%

With over 99% of the portfolio's geographic exposure in North America, there's minimal diversification across global markets. This concentration increases vulnerability to regional economic downturns or policy changes. Introducing international equities could enhance diversification and provide exposure to different economic cycles, potentially smoothing returns and reducing risk.

Dividends Info

  • iShares Core S&P 500 ETF 0.90%
  • Weighted yield (per year) 0.90%

The portfolio's dividend yield stands at 0.9%, which is modest compared to some income-focused investments. While dividends can provide a steady income stream, the emphasis here is on growth rather than income. Investors seeking higher income might consider adding dividend-focused equities or other income-generating assets to balance growth and income needs.

Ongoing product costs Info

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

The portfolio benefits from a very low Total Expense Ratio (TER) of 0.03%, which supports better long-term performance by minimizing costs. Keeping expenses low is crucial, as fees can significantly erode returns over time. This cost efficiency is a strong aspect of the portfolio, aligning well with best practices for cost management in investing.

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