A stock-focused portfolio with high U.S. exposure and low diversification across sectors

Report created on Jan 26, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

The portfolio is heavily concentrated in U.S. stock ETFs, with a significant portion allocated to S&P 500-related funds. This composition suggests a focus on large-cap U.S. equities, which aligns with a common benchmark but limits diversification. While the Vanguard Total Stock Market ETF introduces some breadth, the overall asset allocation lacks diversity, particularly in fixed income or international equities. To enhance diversification, consider integrating different asset classes like bonds or international stocks, which can provide stability and reduce overall risk, especially during market downturns.

Growth Info

Historically, the portfolio has performed well, with a CAGR of 13.40%, outperforming many benchmarks. However, it experienced a significant maximum drawdown of -35.03%, indicating vulnerability during market downturns. The portfolio's returns are concentrated in a small number of days, which highlights the importance of staying invested through volatile periods. While past performance is no guarantee of future results, maintaining a diversified approach could help mitigate drawdowns and provide more stable returns over time.

Projection Info

The Monte Carlo simulation, which uses historical data to project future outcomes, suggests a wide range of potential returns. With an annualized return of 14.26% across simulations, the median outcome is promising. However, the 5th percentile indicates potential losses, emphasizing the uncertainty of future markets. It's important to remember that simulations are based on historical trends and don't account for future market changes. Regularly reviewing and adjusting the portfolio to align with changing market conditions and personal goals is advisable.

Asset classes Info

  • Stocks
    100%

The portfolio is entirely invested in stocks, offering no exposure to other asset classes like bonds or real estate. This lack of diversification increases risk, especially in volatile markets. While stocks can provide growth, adding bonds could offer stability and reduce volatility. A more balanced allocation across asset classes might enhance risk-adjusted returns, providing a smoother investment journey. Consider exploring fixed income or alternative investments to achieve a more diversified and resilient portfolio.

Sectors Info

  • Technology
    27%
  • Financials
    15%
  • Health Care
    11%
  • Consumer Discretionary
    9%
  • Industrials
    9%
  • Telecommunications
    7%
  • Consumer Staples
    7%
  • Energy
    4%
  • Utilities
    4%
  • Real Estate
    3%
  • Basic Materials
    2%
  • Consumer Discretionary
    1%

The portfolio is heavily weighted towards technology, with 27% of assets in this sector. While tech has driven significant growth, it also introduces higher volatility, particularly during interest rate hikes. Other sectors like financial services and healthcare provide some balance, but the overall sector diversification remains low. To mitigate sector-specific risks, consider diversifying into underrepresented sectors such as utilities or consumer defensives, which can provide stability during economic downturns.

Regions Info

  • North America
    99%
  • Europe Developed
    1%

With 99% of the portfolio allocated to North America, geographic diversification is minimal. This heavy reliance on the U.S. market exposes the portfolio to regional economic risks. While the U.S. has been a strong performer, international markets, including emerging economies, can offer growth opportunities and diversification benefits. Expanding geographic exposure could reduce regional risk and enhance long-term returns. Consider integrating international ETFs to achieve a more balanced global presence.

Market capitalization Info

  • Large-cap
    35%
  • Mega-cap
    34%
  • Mid-cap
    26%
  • Small-cap
    4%
  • Micro-cap
    1%

The portfolio's market capitalization is skewed towards large-cap and mega-cap stocks, which account for 69% of the allocation. This focus on larger companies provides stability but limits exposure to the potential growth of small and mid-cap stocks. Smaller companies often offer higher growth potential, albeit with increased volatility. Balancing exposure across different market capitalizations can improve diversification and capture growth opportunities across the market spectrum.

Redundant positions Info

  • Schwab S&P 500 Index Fund
    Vanguard High Dividend Yield Index Fund ETF Shares
    SPDR S&P 500 ETF Trust
    Vanguard Total Stock Market Index Fund ETF Shares
    Invesco S&P 500® Equal Weight ETF
    Vanguard S&P 500 ETF
    High correlation

The portfolio's assets are highly correlated, with many funds tracking similar indices. This high correlation reduces diversification benefits, as assets tend to move together during market shifts. Diversifying with less correlated assets can help manage risk and improve portfolio resilience. Consider including investments with lower correlation to the existing holdings, such as international equities or alternative asset classes, to enhance diversification and reduce overall portfolio risk.

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's current asset allocation can be optimized using the Efficient Frontier, which focuses on achieving the best possible risk-return ratio with the existing assets. However, the high correlation among assets limits diversification benefits. Before optimizing, consider reducing overlap by replacing some S&P 500-related funds with less correlated assets. This adjustment can enhance diversification and improve the risk-return profile, making the portfolio more resilient to market fluctuations.

Dividends Info

  • Invesco S&P 500® Equal Weight ETF 1.50%
  • SPDR S&P 500 ETF Trust 0.80%
  • Schwab S&P 500 Index Fund 1.20%
  • 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 2.60%
  • Weighted yield (per year) 1.40%

The portfolio has a modest dividend yield of 1.40%, with the Vanguard High Dividend Yield Index Fund contributing the most. Dividends can provide a steady income stream, which is beneficial for reinvestment or income-focused investors. However, the overall yield is relatively low, given the portfolio's concentration in growth-oriented stocks. If income is a priority, consider increasing exposure to dividend-focused funds or sectors known for higher yields, such as utilities or real estate.

Ongoing product costs Info

  • Invesco S&P 500® Equal Weight ETF 0.20%
  • SPDR S&P 500 ETF Trust 0.10%
  • Schwab S&P 500 Index Fund 0.02%
  • 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) 0.07%

The portfolio's total expense ratio (TER) is a low 0.07%, which is commendable and supports better long-term performance. Lower costs mean more returns are retained, compounding over time. This efficient cost structure aligns well with best practices in investment management. While already optimized in terms of expenses, maintaining a focus on cost-effective investments will continue to benefit the portfolio. Regularly reviewing fund fees ensures costs remain competitive.

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