A balanced portfolio with a focus on S&P 500 and low diversification

Report created on Mar 6, 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 is entirely composed of the Vanguard S&P 500 ETF, making it concentrated in large-cap U.S. stocks. While this provides exposure to a broad range of industries, it lacks diversification across asset classes. A typical balanced portfolio might include a mix of equities, bonds, and other assets to spread risk. Consider adding other asset classes to enhance diversification and potentially stabilize returns during market fluctuations. This concentrated approach can lead to higher volatility if the U.S. stock market faces downturns, so diversifying can help mitigate such risks.

Growth Info

Historically, the Vanguard S&P 500 ETF has delivered an impressive Compound Annual Growth Rate (CAGR) of 13.73%, outperforming many other asset classes. However, it also experienced a significant maximum drawdown of -34.02%, highlighting its vulnerability to market downturns. While past performance can be a helpful gauge, it's crucial to remember that it doesn't guarantee future results. For those seeking to maintain high returns while reducing volatility, consider diversifying into less correlated assets, which might offer more stability during turbulent market periods.

Projection Info

Using Monte Carlo simulations, which project potential future outcomes based on historical data, the portfolio shows promising growth prospects. The median outcome suggests a 483.1% increase, with an annualized return of 14.57%. However, it's important to note that these projections are based on past data and assumptions, which may not hold true in the future. To better prepare for various scenarios, consider stress testing the portfolio with different economic conditions. This could provide a more comprehensive view of potential risks and returns.

Asset classes Info

  • Stocks
    100%

The portfolio is entirely invested in stocks, specifically U.S. large-cap equities, which limits its exposure to other asset classes like bonds or real estate. While equities offer growth potential, they can also introduce volatility. A more diversified portfolio might include a balanced mix of asset classes to mitigate risk and provide stability. By incorporating bonds or alternative investments, you can cushion the impact of market downturns and achieve a more consistent return profile over time, aligning with balanced investment strategies.

Sectors Info

  • Technology
    34%
  • Financials
    13%
  • Consumer Discretionary
    11%
  • Health Care
    10%
  • Telecommunications
    9%
  • Industrials
    7%
  • Consumer Staples
    6%
  • Energy
    3%
  • Utilities
    3%
  • Real Estate
    2%
  • Basic Materials
    2%

The portfolio's sector allocation is heavily tilted towards technology at 34%, followed by financial services and consumer cyclicals. This concentration can result in higher volatility, especially if these sectors face economic headwinds. While the technology sector has driven recent market gains, it can be sensitive to interest rate changes. To reduce sector-specific risks, consider diversifying into underrepresented sectors like utilities or consumer defensives. This balanced approach can help stabilize returns and protect against downturns in specific industries.

Regions Info

  • North America
    99%
  • Europe Developed
    1%

With 99% of the portfolio's exposure in North America, geographic diversification is limited. This concentration may lead to increased risk if the U.S. market underperforms. While the U.S. has been a strong performer, adding international exposure can provide a hedge against domestic economic fluctuations. Consider increasing allocations to developed and emerging markets, which can offer growth opportunities and reduce reliance on a single region. Diversifying geographically helps in capturing global growth trends and mitigating country-specific risks.

Market capitalization Info

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

The portfolio is heavily weighted towards mega and large-cap stocks, which make up 82% of the allocation. While these companies are typically more stable and established, the lack of exposure to small and mid-cap stocks can limit growth potential. Smaller companies often offer higher growth prospects but come with increased volatility. Consider gradually increasing exposure to small and mid-cap stocks to capture their growth potential and achieve a more balanced risk-return profile, aligning with long-term investment goals.

Dividends Info

  • Vanguard S&P 500 ETF 1.20%
  • Weighted yield (per year) 1.20%

The portfolio's dividend yield stands at 1.20%, which is relatively modest. While dividends can provide a steady income stream, the focus on growth-oriented sectors like technology may limit dividend potential. For investors seeking income, consider incorporating dividend-focused funds or stocks with higher yields. This can help balance growth and income objectives, particularly for those nearing retirement or seeking regular cash flow. Balancing growth and income can create a more resilient portfolio that meets diverse financial goals.

Ongoing product costs Info

  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.03%

The portfolio benefits from impressively low costs, with a Total Expense Ratio (TER) of just 0.03%. Low costs are crucial for long-term performance, as they allow more of your returns to compound over time. This cost efficiency is a significant advantage, providing a strong foundation for maximizing returns. While the current cost structure is optimal, regularly reviewing fees and seeking cost-effective investment options can help maintain this advantage. Keeping expenses low is a key factor in achieving long-term investment success.

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