A concentrated portfolio with strong US focus and low diversification
Report created on Jan 12, 2025Risk profile
4/7
Diversification profile
2/5
Positions
-
VO Vanguard S&P 500 ETF
VOO - US9229083632 100.00%
This portfolio is entirely invested in the Vanguard S&P 500 ETF, representing a single asset class with a 100% allocation. This composition is simple and heavily skewed towards stocks, which can lead to significant volatility. While the S&P 500 is a well-regarded benchmark, relying solely on it limits exposure to other asset classes like bonds or international equities. For a balanced profile, consider diversifying into other asset classes to reduce risk and enhance stability, especially during market downturns.
Growth
The portfolio has demonstrated a strong historic performance, with a Compound Annual Growth Rate (CAGR) of 14.15%. This robust growth rate exceeds many benchmarks, indicating effective past performance. However, the max drawdown of -34.02% highlights potential risks during market corrections. While past performance is promising, it's essential to remember that it doesn't guarantee future results. Consider diversifying to mitigate potential drawdowns and ensure more stable returns in various market conditions.
Projection
Using a Monte Carlo simulation, the portfolio's future performance was projected with 1,000 simulations. This method uses historical data to estimate potential outcomes, showing a median return of 528.28% and a 67th percentile return of 729.95%. Although 994 simulations resulted in positive returns, it's crucial to note that simulations rely on historical data, which may not predict future market behavior. Diversifying the portfolio could improve resilience against unexpected market shifts and enhance long-term growth prospects.
Asset classes
- Stocks 100%
The portfolio's allocation is overwhelmingly in stocks, with a minor cash component. This lack of diversification across asset classes might expose the portfolio to higher volatility. While equities offer growth potential, incorporating bonds or alternative investments can provide stability and reduce risk. A more diversified asset allocation can help balance the risk-return profile, especially for investors seeking a balanced approach. Consider adding fixed-income or alternative assets to diversify and stabilize the portfolio.
Sectors
- Technology 33%
- Financials 13%
- Health Care 11%
- Consumer Discretionary 10%
- Telecommunications 9%
- Industrials 8%
- Consumer Staples 6%
- Energy 3%
- Utilities 3%
- Real Estate 2%
- Basic Materials 2%
The sector allocation is heavily concentrated in technology, which constitutes over 33% of the portfolio. This tech-heavy focus can lead to increased volatility, especially during periods of rising interest rates. Other sectors like financial services and healthcare provide some balance but remain underrepresented. For better diversification, consider increasing exposure to underrepresented sectors. A balanced sector distribution can help mitigate sector-specific risks and improve overall portfolio resilience.
Regions
- North America 99%
- Europe Developed 1%
The portfolio's geographic exposure is predominantly in North America, with over 99% allocation. This heavy concentration limits international diversification, which could impact performance during regional downturns. While the US market offers substantial growth potential, adding exposure to developed and emerging markets can enhance diversification and reduce region-specific risks. Consider incorporating international equities to balance geographic exposure and capture growth opportunities worldwide.
Dividends
- Vanguard S&P 500 ETF 1.30%
- Weighted yield (per year) 1.30%
The Vanguard S&P 500 ETF provides a modest dividend yield of 1.3%, contributing to the portfolio's overall return. Dividends can offer a steady income stream and reduce reliance on capital gains for returns. While the current yield is relatively low, reinvesting dividends can enhance long-term growth. For investors seeking higher income, consider adding dividend-focused investments to boost yield and provide additional income stability.
Ongoing product costs
- Vanguard S&P 500 ETF 0.03%
- Weighted costs total (per year) 0.03%
The portfolio benefits from impressively low costs, with a Total Expense Ratio (TER) of just 0.03%. Low costs can significantly improve long-term returns by minimizing the drag on performance. This efficiency aligns well with best practices, ensuring more of your money is working for you. Maintaining low costs is a strength of this portfolio, and it's advisable to continue prioritizing cost-effective investments to maximize returns.
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