A concentrated portfolio with strong growth potential but limited geographic diversification
Report created on Jan 8, 2025Risk profile
4/7
Diversification profile
2/5
Positions
-
VU Vanguard S&P 500 UCITS Acc
VUAA - IE00BFMXXD54 100.00%
This portfolio is solely invested in the Vanguard S&P 500 UCITS ETF, representing 100% allocation to stocks. Such a concentrated structure lacks diversification across asset classes, which can increase risk during market downturns. In contrast, balanced portfolios often include a mix of stocks, bonds, and other assets. While this allocation can offer significant growth potential, it may expose the investor to more volatility. Consider diversifying into other asset classes to reduce risk and improve stability over time.
Growth
Historically, the portfolio has shown impressive growth, with a Compound Annual Growth Rate (CAGR) of 15.94%. This figure suggests strong past performance, likely driven by the robust growth of the S&P 500 index. However, the maximum drawdown of -33.68% indicates significant potential losses during market downturns. It's essential to remember that past performance does not guarantee future results. Maintaining a diversified approach may help mitigate such risks while still aiming for growth.
Projection
The Monte Carlo simulation projects potential outcomes based on historical data, with an annualized return of 17.03%. While all simulations resulted in positive returns, it's crucial to note that these are based on past market conditions. The simulation's 5th percentile projection of 163.61% highlights potential risks, while the 50th percentile of 680.79% shows possible median outcomes. While these projections can guide expectations, they are not guarantees. Regularly reviewing and adjusting the portfolio can help align it with evolving market conditions.
Asset classes
- Stocks 100%
The portfolio's sole allocation to stocks limits diversification across asset classes. Common benchmarks often include a mix of stocks, bonds, and other assets to balance risk and return. A 100% stock allocation can lead to higher volatility, especially during market downturns. Diversifying into different asset classes can provide a buffer against such volatility, potentially enhancing long-term stability and performance. Consider exploring bonds or alternative assets to achieve a more balanced risk profile.
Sectors
- Technology 33%
- Financials 13%
- Consumer Discretionary 11%
- Health Care 11%
- Telecommunications 9%
- Industrials 8%
- Consumer Staples 6%
- Energy 3%
- Utilities 3%
- Real Estate 2%
- Basic Materials 2%
The portfolio is heavily weighted towards the Technology sector, comprising 32.63% of the allocation. This concentration aligns with trends in the S&P 500 but may increase exposure to sector-specific risks. Other sectors, such as Financial Services and Consumer Cyclicals, also have significant representation. While this sectoral allocation can drive growth, it may also lead to higher volatility during sector downturns. Diversifying across more sectors can help mitigate these risks and provide a more balanced portfolio.
Regions
- North America 99%
- Europe Developed 1%
With 99.42% exposure to North America, the portfolio lacks geographic diversification. This concentration can lead to increased vulnerability to regional economic downturns or policy changes. Common benchmarks often include a broader geographic mix, offering exposure to different economic cycles and growth opportunities. To enhance diversification, consider including assets from Europe, Asia, and other regions. This approach can help balance risks and capitalize on global growth trends.
Ongoing product costs
- Vanguard S&P 500 UCITS Acc 0.07%
- Weighted costs total (per year) 0.07%
The Vanguard S&P 500 UCITS ETF boasts a low Total Expense Ratio (TER) of 0.07%, minimizing costs and supporting better long-term returns. Low costs are advantageous as they allow more of the investment's growth to benefit the investor. This cost efficiency aligns with best practices, ensuring that fees do not erode returns. Maintaining this low-cost approach is beneficial, but regularly reviewing cost structures can help ensure continued efficiency.
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