A growth-focused portfolio with concentrated exposure to the S&P 500
Report created on Apr 10, 2025Risk profile
5/7
Diversification profile
2/5
Positions
-
SP SPDR® Portfolio S&P 500 ETF
SPLG - US78464A8541 100.00%
This portfolio is entirely composed of the SPDR® Portfolio S&P 500 ETF, which tracks the performance of the S&P 500 index. It is heavily weighted in U.S. large-cap stocks, with no exposure to other asset classes like bonds or international equities. This concentration can lead to significant growth potential, but it also increases vulnerability to market downturns. A more diversified portfolio might include a mix of asset classes to mitigate risk. Adding international stocks or bonds could provide stability and reduce reliance on the U.S. market alone.
Growth
Historically, this portfolio has performed well, with a Compound Annual Growth Rate (CAGR) of 12.97%. This means that if you had invested $10,000 ten years ago, it would now be worth approximately $33,700. However, the maximum drawdown of -33.86% indicates significant potential losses during market downturns. Comparing this to a benchmark like the S&P 500 shows alignment in performance, but the lack of diversification could amplify losses. Consider adding assets that perform differently in various market conditions to stabilize returns.
Projection
The Monte Carlo simulation, which uses historical data to predict future outcomes, suggests varied potential returns. The 5th percentile shows a 66% increase, while the 67th percentile shows a 575.4% increase, indicating a wide range of possible outcomes. Although 991 out of 1,000 simulations show positive returns, past performance does not guarantee future results. These projections highlight the importance of diversification to manage risk, as reliance on historical data alone may not account for unforeseen market changes.
Asset classes
- Stocks 100%
The portfolio is entirely invested in stocks, specifically large-cap U.S. equities. This lack of diversification across asset classes can lead to increased volatility. While stocks generally offer higher returns than bonds or cash over the long term, they also come with higher risk. Incorporating other asset classes like bonds or real estate could reduce overall portfolio risk and provide a buffer during market downturns. This would align the portfolio more closely with diversified benchmark standards.
Sectors
- Technology 32%
- Financials 14%
- Health Care 11%
- Consumer Discretionary 10%
- Telecommunications 9%
- Industrials 8%
- Consumer Staples 6%
- Energy 4%
- Utilities 3%
- Real Estate 2%
- Basic Materials 2%
The portfolio's sector allocation is heavily weighted towards technology, at 32%, followed by financial services and healthcare. This concentration can lead to higher volatility, particularly if specific sectors underperform. For example, tech-heavy portfolios may suffer during interest rate hikes. Balancing exposure across more sectors could reduce risk and improve stability. Aligning with broader market benchmarks that distribute weight more evenly across sectors may help mitigate sector-specific risks.
Regions
- North America 99%
- Europe Developed 1%
Geographic exposure is predominantly in North America, with 99% of the portfolio's assets based in the U.S. This concentration limits exposure to international markets, which can provide diversification benefits. While the U.S. market has performed well historically, adding international equities could reduce reliance on the U.S. economy and offer opportunities in emerging markets. A more balanced geographic allocation could align better with global benchmarks and reduce potential regional risks.
Market capitalization
- Mega-cap 46%
- Large-cap 35%
- Mid-cap 18%
- Small-cap 1%
The portfolio is primarily invested in large-cap stocks, with 46% in mega-cap and 35% in big-cap companies. This focus on large, established companies offers stability but may limit growth potential compared to small or mid-cap stocks. Including a broader range of market capitalizations could enhance diversification and potentially increase returns. Smaller companies often have higher growth potential, though they come with increased volatility. A balanced approach could provide a better risk-return profile.
Dividends
- SPDR® Portfolio S&P 500 ETF 1.40%
- Weighted yield (per year) 1.40%
The SPDR® Portfolio S&P 500 ETF offers a dividend yield of 1.40%, which contributes to the portfolio's overall returns. Dividends can provide a steady income stream and help offset market volatility. However, the focus on growth suggests that dividend income is not the primary goal. For investors seeking income, adding higher-dividend-paying stocks or funds could enhance yield. Balancing growth and income can create a more comprehensive investment strategy that aligns with individual financial goals.
Ongoing product costs
- SPDR® Portfolio S&P 500 ETF 0.02%
- Weighted costs total (per year) 0.02%
The portfolio benefits from low costs, with a Total Expense Ratio (TER) of 0.02%. This is advantageous for long-term performance, as lower fees mean more of your money remains invested and compounding over time. Keeping costs low is a positive aspect of this portfolio. However, it's important to ensure that low costs do not come at the expense of diversification. While this ETF offers cost efficiency, exploring additional funds with slightly higher fees might provide broader diversification benefits.
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