A focused portfolio with a strong emphasis on US equities and low diversification
Report created on Jan 3, 2025Risk profile
4/7
Diversification profile
2/5
Positions
-
VO Vanguard S&P 500 ETF
VOO - US9229083632 100.00%
The portfolio consists entirely of the Vanguard S&P 500 ETF, which is a stock-based ETF. This means the portfolio lacks diversification across different asset classes, such as bonds or commodities. Typically, a balanced portfolio would include a mix of asset types to spread risk. By focusing solely on a single ETF, the portfolio may experience significant volatility, especially during market downturns. To align more closely with a balanced risk profile, consider incorporating other asset classes like bonds or international equities, which can help reduce risk and improve stability.
Growth
Historically, the portfolio has performed well, with a Compound Annual Growth Rate (CAGR) of 14.16%. This impressive growth rate suggests strong past performance, likely driven by the robust performance of the US stock market. However, it's important to note that past performance does not guarantee future results. The portfolio's maximum drawdown of -34.01% indicates its vulnerability to significant market declines. To mitigate future risks, consider diversifying across more asset classes, which can help cushion the impact of market downturns.
Projection
Forward projections using Monte Carlo simulations show a wide range of potential outcomes. The simulation, which uses historical data to forecast future performance, indicates a median return of 483.22%. However, the 5th percentile outcome at 91.24% highlights potential downside risks. These projections are based on historical trends and do not guarantee future performance. To better manage risk, consider diversifying the portfolio to include a broader range of assets, which can help stabilize returns over time.
Asset classes
- Stocks 100%
The portfolio is heavily weighted in stocks, with 99.92% allocation, and a negligible cash position. Such concentration in a single asset class limits diversification benefits and may increase volatility. In comparison, a typical balanced portfolio might include bonds or other asset classes to manage risk. To enhance diversification, consider adding different types of assets that do not move in tandem with stocks, potentially reducing overall portfolio risk and providing a more stable return profile.
Sectors
- Technology 33%
- Financials 13%
- Health Care 11%
- Consumer Discretionary 10%
- Telecommunications 9%
- Industrials 8%
- Consumer Staples 6%
- Energy 3%
- Utilities 3%
- Real Estate 2%
- Basic Materials 2%
The portfolio's sector allocation is tech-heavy, with 33.02% in technology. This concentration can lead to higher volatility, especially during periods of tech market corrections. Other sectors like financial services and healthcare are also represented but to a lesser extent. A well-diversified portfolio typically balances exposure across various sectors to mitigate sector-specific risks. To achieve better sector diversification, consider reallocating some investments to underrepresented sectors, which can help stabilize returns.
Regions
- North America 99%
- Europe Developed 1%
The portfolio is predominantly exposed to North America, with 99.4% of its assets in the region. This geographic concentration may limit diversification benefits and increase vulnerability to regional economic downturns. A more balanced portfolio might include international equities to spread risk across different markets. By incorporating assets from regions like Europe or Asia, you can potentially reduce geographic risk and benefit from growth opportunities in other parts of the world.
Dividends
- Vanguard S&P 500 ETF 1.20%
- Weighted yield (per year) 1.20%
The portfolio's dividend yield is 1.2%, which contributes to overall returns. Dividends can provide a steady income stream, especially during periods of market volatility. However, relying solely on dividends from a single ETF may limit income potential. To enhance dividend income, consider investing in dividend-focused funds or stocks across different sectors and regions. This approach can help increase the stability of cash flows and provide a buffer against market fluctuations.
Ongoing product costs
- Vanguard S&P 500 ETF 0.03%
- Weighted costs total (per year) 0.03%
The portfolio benefits from exceptionally low costs, with a Total Expense Ratio (TER) of just 0.03%. This low cost structure supports better long-term performance by minimizing fees that can erode returns. Keeping costs low is crucial for maximizing investment growth over time. Continue to monitor fees and consider cost-effective investment options to maintain this advantage. This focus on low fees is a positive aspect of the portfolio, helping to enhance net returns.
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