A cautious portfolio with a strong focus on the S&P 500 and limited diversification

Risk profile

  • Secure
    Speculative

The risk profile, derived from past market volatility, reflects the level of risk the portfolio is exposed to. This assessment helps align your investments with your financial goals and comfort with market fluctuations.

Diversification profile

  • Focused
    Diversified

The diversification assessment evaluates the spread of investments across asset classes, regions, and sectors. This ensures a balanced mix, reducing risk and maximizing returns by not concentrating in any single area.

What type of investor this portfolio is suitable for

Cautious Investors

This portfolio suits a cautious investor with a focus on capital preservation and moderate growth. With a strong emphasis on large-cap U.S. equities, it aligns with those seeking stability and low volatility. The limited diversification suggests a preference for familiar markets and a long-term investment horizon. Investors comfortable with this approach may appreciate the portfolio's low costs and strong historic performance, but should consider enhancing diversification to manage risk effectively.

Positions

  • Vanguard S&P 500 ETF
    VOO - US9229083632
    73.92%
  • Vanguard Total Stock Market Index Fund ETF Shares
    VTI - US9229087690
    23.84%
  • Fidelity Wise Origin Bitcoin Trust
    FBTC
    2.24%

This portfolio is heavily concentrated in two major ETFs: the Vanguard S&P 500 ETF and the Vanguard Total Stock Market Index Fund ETF Shares, making up over 97% of the portfolio. A small allocation to the Fidelity Wise Origin Bitcoin Trust adds a slight diversification element. Compared to typical benchmarks, this composition is highly concentrated, which can limit exposure to a broader range of opportunities. While the portfolio benefits from low costs, it could be enhanced by including other asset types or regions to achieve better diversification and risk management.

Warning The historical data covers less than 2 years, which reduces the confidence in the calculated values.

Growth Info

The portfolio has demonstrated impressive historic performance, with a Compound Annual Growth Rate (CAGR) of 25.95%. This is significantly higher than the average market returns, indicating strong past growth. However, the maximum drawdown of -8.70% shows that periods of decline were relatively mild. It's crucial to remember that past performance doesn't guarantee future results. To sustain growth, it's advisable to monitor market conditions and consider diversifying the portfolio to cushion against potential downturns.

Warning Due to limited historical data, this may show extreme values that are not realistic.

Projection Info

Forward projections using Monte Carlo simulations suggest a wide range of potential outcomes. With 1,000 simulations, the portfolio's annualized return is projected at 55.48%, with the 50th percentile showing a strong potential value increase. However, the reliance on historical data means these projections are not foolproof. The simulations indicate a positive return in all scenarios, but it's important to prepare for variability. Diversifying asset classes and geographic exposure could help mitigate risks and stabilize returns over time.

Asset classes Info

  • Stocks
    98%
  • Other
    2%
  • Cash
    0%

The asset allocation is heavily skewed towards stocks, with 98% in equities and only 2% in other assets. This concentration limits diversification benefits and exposes the portfolio to stock market volatility. Compared to more balanced portfolios, this allocation lacks exposure to bonds or alternative investments, which could provide stability during market fluctuations. Diversifying into different asset classes could enhance the portfolio's resilience and potentially improve risk-adjusted returns.

Sectors Info

  • Technology
    33%
  • Financials
    13%
  • Consumer Discretionary
    11%
  • Health Care
    10%
  • Telecommunications
    9%
  • Industrials
    7%
  • Consumer Staples
    5%
  • Energy
    3%
  • Utilities
    2%
  • Real Estate
    2%
  • Basic Materials
    2%

The portfolio is notably tech-heavy, with 33% allocated to the technology sector. While this has been beneficial in recent years, it also increases vulnerability to sector-specific downturns, especially during interest rate hikes. Other sectors like financial services and consumer cyclicals offer some balance, but the overall sector distribution mirrors common indices. To reduce sector risk, consider a more even distribution across various industries, which can provide stability and capture growth in other areas.

Regions Info

  • North America
    97%
  • Europe Developed
    0%
  • Asia Developed
    0%
  • Latin America
    0%
  • Asia Emerging
    0%
  • Africa/Middle East
    0%

The portfolio's geographic exposure is overwhelmingly concentrated in North America, with 97% of assets allocated there. This lack of international diversification can increase vulnerability to regional economic downturns and miss out on growth in other markets. Compared to global benchmarks, this portfolio is underexposed to Europe, Asia, and emerging markets. Expanding geographic exposure could reduce risk and enhance potential returns by capturing growth opportunities in diverse regions.

Market capitalization Info

  • Mega-cap
    44%
  • Large-cap
    33%
  • Mid-cap
    18%
  • Small-cap
    2%
  • Micro-cap
    1%

The portfolio is predominantly invested in large-cap stocks, with 77% allocated to mega and big-cap companies. This focus on established companies provides stability but may limit exposure to high-growth opportunities typically found in smaller firms. The minimal allocation to small and micro-cap stocks suggests a conservative approach. To capture potential growth, consider increasing exposure to medium and small-cap stocks, which can offer higher returns albeit with increased volatility.

Redundant positions Info

  • Vanguard S&P 500 ETF
    Vanguard Total Stock Market Index Fund ETF Shares
    High correlation

The portfolio exhibits high correlation between its main components, the Vanguard S&P 500 ETF and the Vanguard Total Stock Market Index Fund ETF Shares. This alignment suggests that the assets tend to move together, reducing diversification benefits. In market downturns, highly correlated assets may not provide the desired risk mitigation. To enhance diversification, consider including assets with lower correlation, which can help balance risk and improve overall portfolio stability.

Dividends Info

  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.20%
  • Weighted yield (per year) 1.17%

The portfolio's dividend yield is relatively modest at 1.17%, aligning with typical market averages. While dividends contribute to total returns, this yield may not significantly impact overall performance. For income-focused investors, a higher dividend yield might be desirable. However, given the portfolio's growth orientation, the current yield is appropriate. If income generation becomes a priority, consider reallocating to higher-yielding assets to supplement growth with regular income.

Ongoing product costs Info

  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total Stock Market Index Fund ETF Shares 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%. This cost efficiency supports long-term performance by minimizing the drag on returns. Low fees are a significant advantage, allowing more of the portfolio's gains to be retained by the investor. Maintaining this cost structure is beneficial, but it's essential to balance cost considerations with diversification and risk management to ensure the portfolio meets broader investment goals.

Risk vs. return

This chart shows the Efficient Frontier, calculated using your current assets with different allocation combinations. It highlights the best balance between risk and return based on historical data. "Efficient" portfolios maximize returns for a given risk or minimize risk for a given return. Portfolios below the curve are less efficient. This is informational and not a recommendation to buy or sell any assets.

The current portfolio composition may not be on the Efficient Frontier, which represents the best possible risk-return ratio. Before optimizing, it's crucial to address the high correlation between major holdings, which limits diversification. By reallocating assets to reduce overlap, the portfolio could achieve a more efficient balance, enhancing potential returns for the level of risk taken. It's important to remember that optimization focuses on the current assets and does not necessarily imply diversification across new asset classes or regions.

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