A concentrated portfolio focused on US growth with high historical returns but limited diversification
Report created on Dec 14, 2024Risk profile
4/7
Diversification profile
2/5
Positions
-
VU Vanguard S&P 500 UCITS ETF
VUSA - IE00B3XXRP09 100.00%
The portfolio is entirely composed of the Vanguard S&P 500 UCITS ETF, representing a 100% allocation to this single asset. This ETF tracks the performance of the S&P 500, which is an index of 500 leading companies in the United States. The lack of diversification across different asset types makes this portfolio highly concentrated. A single asset class exposure means that while you might benefit from the growth of US large-cap stocks, you are also susceptible to the risks associated with this specific market segment. To manage risk better, consider introducing other asset classes like bonds or international equities.
Growth
Historically, the portfolio has shown a strong compound annual growth rate (CAGR) of 16.46%, which is quite impressive. However, it also experienced a maximum drawdown of -25.47%, indicating significant volatility. The high returns are reflective of the strong performance of the US stock market over recent years. While past performance can provide insights, it does not guarantee future results. It's important to understand that the high returns come with higher risk, as evidenced by the drawdown. Diversifying into other asset classes or regions may help mitigate some risks associated with future downturns.
Projection
The forward projection, based on a Monte Carlo simulation with 1,000 iterations, suggests a range of potential outcomes for the portfolio. The simulation uses historical data to forecast future performance, indicating an annualized return of 17.99%. This method shows a 5th percentile outcome of 244.94% and a 67th percentile of 1,107.81%, demonstrating both potential gains and risks. While simulations offer a glimpse into possible futures, they rely on historical trends, which may not account for unforeseen market changes. It's wise to regularly review and adjust your portfolio in response to changing market conditions and personal goals.
Asset classes
- Stocks 100%
The portfolio is solely invested in stocks, with no exposure to other asset classes such as bonds or real estate. This singular focus on equities can lead to high returns during bull markets but also exposes you to greater volatility. By diversifying into other asset classes, you can potentially reduce risk and achieve more stable returns. Consider allocating a portion of your investment to fixed-income securities or alternative investments to balance the risk-return profile of your 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 within the portfolio is heavily weighted towards technology at 33.01%, followed by financial services and healthcare. This concentration in a few sectors can lead to increased risk if those sectors underperform. While these sectors have driven growth in the past, it's essential to consider the cyclical nature of markets. Diversifying into other sectors like utilities or consumer staples could provide more stability and reduce the impact of sector-specific downturns.
Regions
- North America 99%
- Europe Developed 1%
Geographically, the portfolio is overwhelmingly concentrated in North America, with 99.4% exposure. This heavy reliance on a single region increases vulnerability to economic or political changes within that region. While the US market has been strong, diversifying geographically can help mitigate risks associated with regional downturns. Consider adding exposure to emerging markets or other developed regions to enhance diversification and capture growth opportunities globally.
Dividends
- Vanguard S&P 500 UCITS ETF 0.60%
- Weighted yield (per year) 0.60%
The portfolio's dividend yield is relatively low at 0.6%, reflecting the focus on growth rather than income. While dividends can provide a steady income stream, the low yield suggests that the portfolio is more suited for capital appreciation. If generating income is a priority, consider incorporating dividend-focused investments or income-generating assets like bonds to enhance the yield. This could help balance the portfolio's growth and income objectives.
Ongoing product costs
- Vanguard S&P 500 UCITS ETF 0.07%
- Weighted costs total (per year) 0.07%
The Vanguard S&P 500 UCITS ETF has a low total expense ratio of 0.07%, making it a cost-effective option for investors. Low costs are beneficial as they can improve net returns over time. However, while the ETF's fees are minimal, the lack of diversification may not justify the cost savings. Consider whether the low costs are sufficient compensation for the potential risks of a concentrated portfolio. Exploring other low-cost investment options that offer greater diversification could enhance long-term performance.
What next?
Create your own report?
Join our community!
The information provided on this platform is for informational purposes only and should not be considered as financial or investment advice. Insightfolio does not provide investment advice, personalized recommendations, or guidance regarding the purchase, holding, or sale of financial assets. The tools and content are intended for educational purposes only and are not tailored to individual circumstances, financial needs, or objectives.
Insightfolio assumes no liability for the accuracy, completeness, or reliability of the information presented. Users are solely responsible for verifying the information and making independent decisions based on their own research and careful consideration. Use of the platform should not replace consultation with qualified financial professionals.
Investments involve risks. Users should be aware that the value of investments may fluctuate and that past performance is not an indicator of future results. Investment decisions should be based on personal financial goals, risk tolerance, and independent evaluation of relevant information.
Insightfolio does not endorse or guarantee the suitability of any particular financial product, security, or strategy. Any projections, forecasts, or hypothetical scenarios presented on the platform are for illustrative purposes only and are not guarantees of future outcomes.
By accessing the services, information, or content offered by Insightfolio, users acknowledge and agree to these terms of the disclaimer. If you do not agree to these terms, please do not use our platform.
Instrument logos provided by Elbstream.
Help us improve Insightfolio
Your feedback makes a difference! Share your thoughts in our quick survey. Take the survey