A concentrated portfolio with a focus on high dividends and large-cap U.S. equities

Report created on Jan 29, 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 consists of three Vanguard ETFs, heavily weighted towards the Vanguard High Dividend Yield Index Fund ETF Shares at 70.77%. The remaining portion is split between the Vanguard Total Stock Market Index Fund ETF Shares at 15.20% and the Vanguard S&P 500 ETF at 14.03%. This composition is heavily skewed towards U.S. equities, with a significant focus on dividend yield. Compared to a typical balanced benchmark, this portfolio lacks diversification across asset classes. A more diversified portfolio might include bonds or international equities to balance risk and potential returns.

Growth Info

Historically, this portfolio has delivered a strong Compound Annual Growth Rate (CAGR) of 12.04%, indicating robust growth over time. However, it also experienced a maximum drawdown of -34.81%, highlighting potential volatility during market downturns. When compared to a balanced benchmark, the portfolio's performance reflects a higher risk-reward profile. While past performance is not indicative of future results, it suggests that the portfolio has the potential to deliver high returns, albeit with notable risk.

Projection Info

Monte Carlo simulations, which use historical data to project potential future outcomes, indicate a wide range of possible portfolio values. With a median projection of 448.7% and a 67th percentile outcome of 627.6%, the portfolio shows promising potential. However, the 5th percentile outcome is only 88.3%, indicating that there is still a risk of underperformance. While these projections are useful, they are not guarantees, as market conditions can change unexpectedly. Adjusting for diversification could help manage some of this uncertainty.

Asset classes Info

  • Stocks
    100%

This portfolio is entirely allocated to stocks, lacking exposure to other asset classes like bonds or real estate. Such concentration may limit its ability to withstand market volatility. Diversification across different asset classes can help mitigate risk by balancing potential losses in one area with gains in another. For a more balanced approach, consider introducing fixed-income assets or alternative investments to reduce overall risk and enhance stability.

Sectors Info

  • Financials
    20%
  • Technology
    19%
  • Health Care
    11%
  • Consumer Staples
    11%
  • Industrials
    10%
  • Consumer Discretionary
    8%
  • Energy
    8%
  • Utilities
    5%
  • Telecommunications
    5%
  • Basic Materials
    2%
  • Real Estate
    1%

The sector allocation reveals a focus on Financial Services (20%) and Technology (19%), with significant representation in Healthcare, Consumer Defensive, and Industrials. This allocation aligns with common benchmarks but lacks exposure to sectors like Real Estate and Basic Materials. Concentration in sectors like Technology may lead to higher volatility, especially during economic shifts. Diversifying across more sectors can provide stability and reduce reliance on the performance of a few industries.

Regions Info

  • North America
    99%
  • Europe Developed
    1%

The portfolio is heavily concentrated in North American equities, with 99% exposure, leaving it vulnerable to regional economic downturns. This lack of geographic diversification could result in missed opportunities in emerging markets or other international regions. To enhance diversification, consider reallocating a portion of the portfolio to include international equities, which can provide exposure to different economic cycles and growth opportunities.

Market capitalization Info

  • Large-cap
    45%
  • Mega-cap
    25%
  • Mid-cap
    23%
  • Small-cap
    5%
  • Micro-cap
    1%

The portfolio is well-diversified across market capitalizations, with a focus on large (45%) and mega-cap (25%) stocks. Mid-cap stocks make up 23%, while small and micro-cap stocks are underrepresented. While this allocation provides stability and potential for growth, increasing exposure to small and micro-cap stocks could enhance returns, albeit with increased risk. Balancing market caps can optimize risk and return, catering to different growth phases of companies.

Redundant positions Info

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

The portfolio includes highly correlated assets, particularly between the Vanguard Total Stock Market Index Fund ETF Shares and the Vanguard S&P 500 ETF. High correlation means these assets tend to move together, limiting diversification benefits. Reducing overlap by selecting funds with different holdings or investment strategies can enhance diversification. Consider incorporating assets with lower correlation to improve risk management and resilience during market downturns.

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.

Click on the colored dots to explore allocations.

The portfolio may benefit from optimization using the Efficient Frontier, which identifies the best possible risk-return ratio for a given set of assets. However, the current asset correlation and lack of diversification may limit optimization potential. Adjusting allocations to include less correlated and more diverse assets could enhance efficiency. This approach focuses on maximizing returns for a given level of risk, ensuring the portfolio is aligned with investment goals.

Dividends Info

  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.20%
  • Vanguard High Dividend Yield Index Fund ETF Shares 2.70%
  • Weighted yield (per year) 2.26%

With a total dividend yield of 2.26%, the portfolio offers a steady income stream, primarily from the Vanguard High Dividend Yield Index Fund ETF Shares. Dividends can provide a cushion during market volatility, making them attractive for income-focused investors. However, relying heavily on dividends may limit growth potential. Balancing dividend-paying stocks with growth-oriented investments can optimize both income and capital appreciation.

Ongoing product costs Info

  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Vanguard High Dividend Yield Index Fund ETF Shares 0.06%
  • Weighted costs total (per year) 0.05%

The portfolio benefits from low costs, with a Total Expense Ratio (TER) of 0.05%. These low fees help maximize returns over the long term by reducing the drag on performance. Keeping costs low is crucial for compounding wealth, especially in a portfolio with significant equity exposure. It's important to periodically review fees to ensure they remain competitive, as even small increases can impact overall returns.

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