A concentrated US-focused portfolio with strong historical performance and low diversification

Report created on Feb 12, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

This portfolio is entirely composed of the Vanguard Total Stock Market Index Fund ETF, representing 100% allocation to US equities. This concentration means it lacks diversification across different asset classes, such as bonds or international stocks. While this could lead to strong performance during bull markets, it also exposes the portfolio to significant risk if the US market underperforms. Diversifying with other asset classes could help balance risk and potentially enhance long-term returns.

Growth Info

Historically, the portfolio has performed well, boasting a Compound Annual Growth Rate (CAGR) of 13.53%. However, it has also experienced a significant maximum drawdown of -35.01%, indicating vulnerability during market downturns. While past performance is impressive, it's essential to remember that it doesn't guarantee future results. Comparing this performance with a diversified benchmark could provide insights into potential volatility and risk management strategies.

Projection Info

The Monte Carlo simulation, which uses historical data to forecast future outcomes, shows a wide range of potential returns. With a 5th percentile outcome of 93.9% and a 67th percentile of 665.9%, there is considerable uncertainty. While 995 out of 1,000 simulations showed positive returns, it's crucial to understand that these projections are not guarantees. Adjusting the portfolio to include a mix of assets could reduce volatility and provide more stable growth prospects.

Asset classes Info

  • Stocks
    100%

The portfolio's allocation is entirely in stocks, which can lead to high volatility. While stocks offer growth potential, they also carry risk, especially without the stabilizing influence of bonds or other asset classes. Diversifying into different asset classes could help mitigate risk and improve overall portfolio resilience, especially during periods of market stress.

Sectors Info

  • Technology
    32%
  • Financials
    14%
  • Consumer Discretionary
    11%
  • Health Care
    10%
  • Telecommunications
    9%
  • Industrials
    9%
  • Consumer Staples
    5%
  • Energy
    3%
  • Real Estate
    3%
  • Utilities
    2%
  • Basic Materials
    2%

The portfolio is heavily weighted towards technology (32%), followed by financial services (14%) and consumer cyclicals (11%). This concentration may lead to higher volatility, particularly if these sectors face challenges. A more balanced sector allocation could help reduce risk and provide smoother returns, especially during economic cycles where certain sectors may underperform.

Regions Info

  • North America
    100%

With 100% exposure to North America, this portfolio lacks geographic diversification. This concentration could pose risks if the US market faces prolonged downturns. Incorporating international equities could provide exposure to different economic cycles and growth opportunities, potentially enhancing returns while reducing risk associated with a single region.

Market capitalization Info

  • Mega-cap
    41%
  • Large-cap
    31%
  • Mid-cap
    20%
  • Small-cap
    6%
  • Micro-cap
    2%

The portfolio is diversified across market capitalizations, with 41% in mega caps and 31% in big caps. However, it has less exposure to small and micro caps, which can offer higher growth potential but also carry more risk. Balancing exposure across different market caps could provide a mix of stability and growth, potentially enhancing long-term returns.

Dividends Info

  • Vanguard Total Stock Market Index Fund ETF Shares 1.20%
  • Weighted yield (per year) 1.20%

The portfolio's dividend yield is 1.20%, which can contribute to returns, especially during periods of market volatility. While dividends provide a source of income, relying solely on them for returns may not be sufficient. Balancing growth and income strategies could enhance overall portfolio performance and provide a more reliable income stream.

Ongoing product costs Info

  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Weighted costs total (per year) 0.03%

The Vanguard Total Stock Market Index Fund ETF has a very low Total Expense Ratio (TER) of 0.03%, which is commendable. Low costs can significantly improve long-term returns by reducing the drag on performance. Maintaining this low-cost approach while exploring diversification opportunities could enhance the portfolio's efficiency and potential returns.

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