A concentrated portfolio focused on US equities with a strong historical performance
Report created on Jan 7, 2025Risk profile
4/7
Diversification profile
2/5
Positions
-
VU Vanguard S&P 500 UCITS Acc
VUAA - IE00BFMXXD54 100.00%
The portfolio consists entirely of the Vanguard S&P 500 UCITS Acc ETF, with a 100% allocation to this single asset. This ETF focuses on the S&P 500 index, which represents large-cap US stocks. While this provides exposure to a broad array of sectors, the lack of diversification across asset classes or geographic regions could increase risk. Typically, balanced portfolios include a mix of equities, bonds, and other asset classes to mitigate risk and enhance stability. Consider diversifying by adding other asset classes to align more closely with common balanced portfolio benchmarks.
Growth
Historically, this portfolio has achieved an impressive compound annual growth rate (CAGR) of 16.14%. This performance indicates strong returns relative to many benchmarks, largely driven by the robust growth of US equities. However, it’s important to note the portfolio’s maximum drawdown of -33.68%, indicating significant volatility. While past performance provides context, it doesn’t guarantee future results. To protect against potential downturns, consider strategies to manage volatility, such as diversifying into less correlated assets.
Projection
The forward projection, based on a Monte Carlo simulation with 1,000 scenarios, shows a wide range of potential outcomes. The median forecast suggests a return of 726.1%, with a 5th percentile outcome of 164.1% and a 67th percentile of 993.01%. While 999 simulations resulted in positive returns, it’s crucial to remember that these projections rely on historical data, which can’t predict future market conditions. To improve confidence in future outcomes, consider periodic reviews and adjustments based on changing market dynamics.
Asset classes
- Stocks 100%
The portfolio is solely invested in stocks, lacking exposure to other asset classes like bonds or commodities. Such concentration can lead to increased volatility and risk, especially during equity market downturns. Balanced portfolios typically include a mix of asset classes to spread risk and achieve more stable returns. To align with a balanced risk profile, consider incorporating bonds or other fixed-income assets, which often provide stability and income during volatile equity market periods.
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%
Sector allocation is heavily weighted towards technology at 32.63%, followed by financial services and consumer cyclicals. This concentration in tech could lead to higher volatility, especially if interest rates rise or tech valuations decline. While the portfolio is diversified across several sectors, the dominance of a few sectors may not fully mitigate sector-specific risks. To balance exposure, consider reallocating some investments toward underrepresented sectors, which could help manage sector-specific risks and enhance diversification.
Regions
- North America 99%
- Europe Developed 1%
Geographically, the portfolio is overwhelmingly concentrated in North America, particularly the US, with 99.42% exposure. This limits the benefits of geographic diversification, which can help mitigate risks associated with regional economic downturns or political instability. A more geographically balanced portfolio might include increased exposure to Europe, Asia, or emerging markets. This could provide a hedge against US market fluctuations and capture growth opportunities in other regions.
Ongoing product costs
- Vanguard S&P 500 UCITS Acc 0.07%
- Weighted costs total (per year) 0.07%
The portfolio benefits from a very low total expense ratio (TER) of 0.07%, which is advantageous for long-term investors. Low costs help improve net returns over time, as less of your investment gains are eroded by fees. This aligns well with best practices for cost efficiency in portfolio management. However, always be mindful of any additional costs, such as transaction fees, that might arise from portfolio adjustments or rebalancing activities.
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