A balanced US-focused portfolio with strong historic returns but limited diversification

Report created on Dec 27, 2024

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 solely invested in the SPDR® Portfolio S&P 500 ETF, representing a 100% allocation to a single ETF. Such concentration in one asset limits diversification, which is typically crucial for risk management. While the S&P 500 offers exposure to a broad array of large-cap US stocks, diversifying across multiple asset classes and regions can reduce risk. Consider introducing bonds or international equities to balance out the portfolio and potentially enhance its resilience against market fluctuations.

Growth Info

Historically, this portfolio has performed well, with a Compound Annual Growth Rate (CAGR) of 13.92%. This indicates strong growth over time, especially compared to many other investment options. However, it's important to remember that past performance doesn't guarantee future results. The portfolio's maximum drawdown of -33.85% during market downturns suggests significant volatility. To mitigate such risks, consider incorporating less volatile investments, like bonds, which can stabilize returns during market turbulence.

Projection Info

Using Monte Carlo simulations, this portfolio's future performance was projected with 1,000 different scenarios. The median (50th percentile) outcome suggests a potential growth of 492.65%, indicating optimistic long-term prospects. However, the 5th percentile shows a potential decline, emphasizing the inherent uncertainty of projections. Monte Carlo relies on historical data, which may not fully capture future market conditions. Diversifying the portfolio can help navigate potential downturns and align outcomes more closely with your risk tolerance.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily weighted in stocks, with 99.86% allocated to equities and a minimal 0.14% in cash. This stock-heavy allocation can lead to high returns during bull markets but also exposes the portfolio to significant risk during downturns. A more balanced approach, including bonds or other asset classes, can provide stability and reduce volatility. Diversification across asset classes can help achieve a more consistent performance over time, aligning with a balanced risk profile.

Sectors Info

  • Technology
    33%
  • Financials
    13%
  • Consumer Discretionary
    12%
  • Health Care
    10%
  • Telecommunications
    9%
  • Industrials
    7%
  • Consumer Staples
    6%
  • Energy
    3%
  • Utilities
    2%
  • Real Estate
    2%
  • Basic Materials
    2%

The portfolio is concentrated in technology, comprising 33.44%, followed by financial services and consumer cyclicals. This sector concentration can lead to higher volatility, as seen with tech stocks during interest rate changes. While the S&P 500 offers sector diversity, a more balanced sector allocation could reduce risk. Consider adding exposure to underrepresented sectors, which may provide stability and potentially offset losses during sector-specific downturns.

Regions Info

  • North America
    99%
  • Europe Developed
    1%

With 99.45% of assets in North America, the portfolio is highly concentrated geographically. This overexposure to the US market limits global diversification and increases vulnerability to domestic economic shifts. Expanding geographic exposure can mitigate risks associated with regional downturns and capture growth opportunities in other markets. Consider incorporating international equities or funds to enhance global diversification and align with a balanced investment approach.

Dividends Info

  • SPDR® Portfolio S&P 500 ETF 0.90%
  • Weighted yield (per year) 0.90%

The portfolio's dividend yield is 0.9%, providing a modest income stream. Dividend-paying stocks can offer stability and regular income, beneficial for long-term growth. However, a higher yield could enhance income, especially in volatile markets. Consider incorporating higher-yielding assets or funds to boost income, balancing growth with income generation. This adjustment can align with goals of steady returns and income.

Ongoing product costs Info

  • SPDR® Portfolio S&P 500 ETF 0.02%
  • Weighted costs total (per year) 0.02%

The portfolio's costs are impressively low, with a Total Expense Ratio (TER) of just 0.02%. This cost-efficiency supports better long-term performance by minimizing expenses that can erode returns. Maintaining low costs is crucial for maximizing growth, especially in a single-ETF portfolio. Regularly review expenses to ensure they remain competitive, and consider cost-effective options when diversifying. This focus on cost management aligns with sound investment principles.

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