A growth-focused portfolio with concentrated exposure to the US stock market
Report created on Jan 12, 2025Risk profile
5/7
Diversification profile
2/5
Positions
-
VT VANGUARD TOTAL STOCK MARKET INDEX FUND ADMIRAL SHARES
VTSAX - US9229087286 100.00%
The portfolio is entirely invested in the Vanguard Total Stock Market Index Fund, which provides broad exposure to the US stock market. This single-asset composition results in low diversification, as it heavily relies on the performance of US equities. While this fund covers a range of sectors, the lack of asset class diversity can increase risk, especially during market downturns. For a more balanced approach, consider diversifying into other asset classes like bonds or international equities, which can help mitigate risks associated with market volatility.
Growth
Historically, the portfolio has performed impressively, with a compound annual growth rate (CAGR) of 13.7%. This indicates strong growth, but it's important to remember that past performance doesn't guarantee future results. The maximum drawdown of nearly 35% highlights the potential for significant losses in volatile markets. Comparing this to a benchmark, such as the S&P 500, can provide context for performance expectations. To manage risk, consider strategies like rebalancing or introducing more defensive assets to cushion against market fluctuations.
Projection
Using a Monte Carlo simulation, which employs historical data to forecast future outcomes, the portfolio shows a promising potential return. The median scenario projects a return of 483.75%, with a 5th percentile outcome still positive at 69.31%. However, simulations are not foolproof and depend on historical trends that may not repeat. While the projections are optimistic, it's wise to remain cautious and regularly review the portfolio to ensure it aligns with changing market conditions and personal financial goals.
Asset classes
- Stocks 100%
The portfolio's asset allocation is heavily skewed towards stocks, with almost no exposure to other asset classes. This concentration can lead to higher volatility and risk, as stock markets can be unpredictable. Compared to a more diversified benchmark, which may include bonds or alternative investments, this portfolio lacks balance. Introducing different asset classes can enhance diversification and potentially reduce volatility, providing a smoother investment journey over time.
Sectors
- Technology 31%
- Financials 13%
- Health Care 12%
- Consumer Discretionary 10%
- Industrials 9%
- Telecommunications 8%
- Consumer Staples 5%
- Energy 4%
- Real Estate 3%
- Utilities 3%
- Basic Materials 2%
The portfolio is technology-heavy, with over 30% allocated to this sector, followed by financial services and healthcare. While these sectors have driven growth in recent years, they can also be more volatile, especially during economic shifts. A sectoral comparison with a benchmark like the S&P 500 might reveal overexposure to certain sectors. To mitigate sector-specific risks, consider spreading investments across a wider range of sectors, including those with defensive characteristics, to achieve a more resilient portfolio.
Regions
- North America 100%
Geographically, the portfolio is overwhelmingly concentrated in North America, with negligible exposure to other regions. This lack of geographic diversification can increase vulnerability to region-specific economic downturns. Compared to a global benchmark, this portfolio is underexposed to international markets, which can offer growth opportunities and risk diversification. Expanding geographic exposure by incorporating international equities or funds can help balance regional risks and tap into global economic growth.
Dividends
- VANGUARD TOTAL STOCK MARKET INDEX FUND ADMIRAL SHARES 1.30%
- Weighted yield (per year) 1.30%
The portfolio offers a modest dividend yield of 1.3%, which can provide a steady income stream. Dividends are important for investors seeking regular income, especially in low-interest environments. However, relying solely on dividends from a single fund may not be sufficient for income-focused goals. To boost dividend income, consider incorporating funds or stocks with higher yields, while balancing the need for growth and risk management.
Ongoing product costs
- VANGUARD TOTAL STOCK MARKET INDEX FUND ADMIRAL SHARES 0.04%
- Weighted costs total (per year) 0.04%
The portfolio benefits from very low costs, with a total expense ratio (TER) of just 0.04%, which is advantageous for long-term returns. Lower costs mean more of your money stays invested, compounding over time. This cost efficiency is a strong aspect of the current setup. However, always be mindful of trading fees or other hidden costs that could impact net returns. Regularly reviewing and minimizing costs can further enhance portfolio performance.
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