A concentrated US equity-focused portfolio with low diversity and high historical returns

Risk profile

  • Secure
    Speculative

The risk profile, derived from past market volatility, reflects the level of risk the portfolio is exposed to. This assessment helps align your investments with your financial goals and comfort with market fluctuations.

Diversification profile

  • Focused
    Diversified

The diversification assessment evaluates the spread of investments across asset classes, regions, and sectors. This ensures a balanced mix, reducing risk and maximizing returns by not concentrating in any single area.

What type of investor this portfolio is suitable for

Balanced Investors

This portfolio suits investors with a balanced risk tolerance, seeking growth through concentrated US equity exposure. Ideal for those with a medium to long-term horizon, it emphasizes capital appreciation over income. Investors comfortable with market volatility and focused on maximizing returns from US equities will find this portfolio aligns with their goals.

Positions

  • Vanguard S&P 500 ETF
    VOO - US9229083632
    40.00%
  • Invesco NASDAQ 100 ETF
    QQQM - US46138G6492
    30.00%
  • Vanguard Total Stock Market Index Fund ETF Shares
    VTI - US9229087690
    30.00%

The portfolio comprises three ETFs: Vanguard S&P 500 ETF (40%), Invesco NASDAQ 100 ETF (30%), and Vanguard Total Stock Market Index Fund ETF Shares (30%). This structure leans heavily towards US equities, reflecting a concentrated asset allocation. Compared to diversified benchmarks, this portfolio lacks exposure to international markets and other asset classes like bonds. Reducing concentration by diversifying into different asset classes or geographies could enhance risk management and potentially improve returns over time.

Growth Info

Historically, the portfolio has delivered a strong Compound Annual Growth Rate (CAGR) of 15.68%, outperforming many market benchmarks. This growth indicates robust past performance, primarily driven by the US equity market's strength. However, it's important to remember that past performance does not guarantee future results. To sustain such returns, consider periodically reviewing the portfolio's alignment with long-term goals and market conditions.

Projection Info

The Monte Carlo simulation, which uses historical data to project future outcomes, suggests a positive outlook with an average annualized return of 17.05%. While this analysis provides valuable insights, it's based on historical trends and cannot predict future market dynamics. Regularly updating simulations with current market data can help maintain a realistic view of potential future returns.

Asset classes Info

  • Stocks
    100%
  • Cash
    0%

The portfolio is exclusively invested in stocks, with no allocation to cash or bonds. This singular focus on equities limits diversification benefits and exposes the portfolio to stock market volatility. Including other asset classes, such as bonds or real estate, could provide a buffer against market swings and create a more balanced risk profile, aligning closer to a diversified benchmark.

Sectors Info

  • Technology
    38%
  • Consumer Discretionary
    12%
  • Telecommunications
    11%
  • Financials
    10%
  • Health Care
    9%
  • Industrials
    7%
  • Consumer Staples
    5%
  • Energy
    3%
  • Utilities
    2%
  • Real Estate
    2%
  • Basic Materials
    2%

With a 38% allocation to technology, the portfolio is heavily weighted towards this sector, which can lead to higher volatility, especially during interest rate changes. Other sectors like consumer cyclicals (12%) and communication services (11%) are also significant. Aligning sector weights with broader market benchmarks could mitigate sector-specific risks and enhance diversification.

Regions Info

  • North America
    99%
  • Europe Developed
    1%
  • Latin America
    0%
  • Asia Emerging
    0%
  • Asia Developed
    0%
  • Africa/Middle East
    0%

The portfolio's geographic exposure is overwhelmingly North American at 99%, with minimal diversification into other regions. This concentration increases vulnerability to US market fluctuations. Diversifying into international markets, including emerging economies, could reduce regional risk and capitalize on global growth opportunities, aligning more closely with global benchmarks.

Market capitalization Info

  • Mega-cap
    47%
  • Large-cap
    34%
  • Mid-cap
    16%
  • Small-cap
    2%
  • Micro-cap
    1%

The portfolio is heavily skewed towards mega-cap stocks (47%), with smaller allocations to big, medium, small, and micro-cap stocks. This focus on large-cap stocks may limit growth potential but offers stability. Balancing market capitalization exposure could enhance diversification and tap into growth opportunities across different company sizes.

Redundant positions Info

  • Vanguard Total Stock Market Index Fund ETF Shares
    Vanguard S&P 500 ETF
    High correlation

The Vanguard Total Stock Market Index Fund ETF Shares and Vanguard S&P 500 ETF are highly correlated, meaning they move similarly in the market. This correlation limits diversification benefits, as both assets react similarly to market changes. Reducing overlap by introducing less correlated assets can enhance portfolio resilience during downturns.

Dividends Info

  • Invesco NASDAQ 100 ETF 0.60%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.20%
  • Weighted yield (per year) 1.02%

The portfolio's dividend yield stands at 1.02%, with contributions from the Invesco NASDAQ 100 ETF (0.60%) and the Vanguard ETFs (1.20% each). While dividends provide a steady income stream, they are relatively low in this portfolio. For income-focused investors, increasing exposure to higher-yielding assets could improve cash flow.

Ongoing product costs Info

  • Invesco NASDAQ 100 ETF 0.15%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Weighted costs total (per year) 0.07%

The portfolio's Total Expense Ratio (TER) is impressively low at 0.07%, supporting better long-term performance by minimizing cost drag. This cost efficiency aligns well with best practices, ensuring more of the portfolio's returns are retained. Maintaining low costs should remain a priority when considering any adjustments.

Risk vs. return

This chart shows the Efficient Frontier, calculated using your current assets with different allocation combinations. It highlights the best balance between risk and return based on historical data. "Efficient" portfolios maximize returns for a given risk or minimize risk for a given return. Portfolios below the curve are less efficient. This is informational and not a recommendation to buy or sell any assets.

While the portfolio's current allocation provides strong historical returns, optimizing for the Efficient Frontier could enhance the risk-return ratio. This involves adjusting the allocation among existing assets to achieve the best possible balance of risk and return. Addressing asset overlap and considering diversification will be crucial for effective optimization.

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