A concentrated S&P 500 ETF portfolio with strong past performance but limited diversification

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 is suited for an investor with a moderate risk tolerance who seeks growth through U.S. equities. It's ideal for those with a medium to long-term investment horizon, comfortable with the volatility of a concentrated equity position. The focus is on capital appreciation rather than income, making it suitable for investors aiming to build wealth over time.

Positions

  • Vanguard S&P 500 UCITS Acc
    VUAA - IE00BFMXXD54
    100.00%

The portfolio consists solely of the Vanguard S&P 500 UCITS Acc ETF, making it highly concentrated with 100% allocation to U.S. large-cap stocks. This lack of diversification can increase risk, as it's heavily reliant on the performance of the U.S. market. While the S&P 500 is a benchmark for U.S. equities, a more diversified approach might include other asset classes like bonds or international equities to mitigate risk.

Growth Info

Historically, this portfolio has delivered a robust Compound Annual Growth Rate (CAGR) of 13.58%, outperforming many other investment vehicles. However, this impressive growth came with a significant maximum drawdown of -33.68%, illustrating the volatility inherent in a concentrated equity position. Comparing this to a diversified benchmark could reveal potential areas for risk reduction while maintaining growth.

Projection Info

Monte Carlo simulations, which use historical data to predict future outcomes, suggest a median annualized return of 14.58%. While this is promising, it's essential to remember that such simulations are not guarantees. They provide a range of potential outcomes, with a 5th percentile outcome of 92.3% and a 67th percentile of 658.4%, indicating substantial variability in potential returns.

Asset classes Info

  • Stocks
    100%

The portfolio is entirely composed of stocks, lacking exposure to other asset classes like bonds or real estate, which could provide stability during market downturns. This single asset class focus may lead to increased volatility, as stocks tend to be more susceptible to market fluctuations compared to bonds or cash equivalents. A more balanced asset allocation could enhance risk-adjusted returns.

Sectors Info

  • Technology
    32%
  • Financials
    14%
  • Consumer Discretionary
    12%
  • Health Care
    10%
  • Telecommunications
    10%
  • Industrials
    7%
  • Consumer Staples
    5%
  • Energy
    3%
  • Utilities
    3%
  • Real Estate
    2%
  • Basic Materials
    2%

The portfolio is heavily weighted towards technology at 32%, followed by financial services and consumer cyclicals. Such a concentration can lead to higher volatility, especially during periods of sector-specific downturns. Diversifying across more sectors could help stabilize returns and reduce the impact of sector-specific risks, aligning closer with global benchmarks.

Regions Info

  • North America
    99%
  • Europe Developed
    1%
  • Asia Developed
    0%

Geographically, the portfolio is almost entirely invested in North America, with a negligible 1% in Europe and none in emerging markets. This overexposure to the U.S. market increases vulnerability to domestic economic downturns. Diversifying into other regions could enhance resilience and offer exposure to growth opportunities in other parts of the world.

Market capitalization Info

  • Mega-cap
    47%
  • Large-cap
    35%
  • Mid-cap
    18%
  • Small-cap
    1%

With 47% in mega-cap and 35% in big-cap stocks, the portfolio is skewed towards larger companies. While these companies are often more stable, they may offer less growth potential compared to mid or small-cap stocks. Introducing a broader range of market capitalizations could improve diversification and potential returns.

Ongoing product costs Info

  • Vanguard S&P 500 UCITS Acc 0.07%
  • Weighted costs total (per year) 0.07%

The Vanguard S&P 500 UCITS Acc ETF boasts a low Total Expense Ratio (TER) of 0.07%, which is excellent for long-term growth as lower costs mean more of the returns are retained. This cost efficiency is a strong point, but adding other low-cost ETFs could diversify the portfolio without significantly increasing expenses.

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