Concentrated US-focused portfolio with minimal international diversification

Report created on Mar 10, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

The portfolio is heavily concentrated in the Vanguard S&P 500 ETF, which makes up 90% of the allocation, with the remaining 10% in the Vanguard Total International Stock Index Fund ETF Shares. This composition leans towards a strong focus on US equities, offering exposure to large-cap US stocks. While this can provide stability and robust growth potential, it limits diversification, as the international exposure is minimal. To enhance diversification, consider gradually increasing the allocation to international equities, which could help mitigate risks associated with US market fluctuations.

Growth Info

Historically, the portfolio has delivered a compound annual growth rate (CAGR) of 13.07%, which is impressive. It indicates strong past performance, particularly benefiting from the US market's growth. However, the maximum drawdown of -33.97% highlights potential volatility, especially during market downturns. When compared to benchmarks like the S&P 500, the performance aligns well, but the lack of international diversification could pose a risk if US markets underperform. It's crucial to remember that past performance doesn't guarantee future results.

Projection Info

The Monte Carlo simulation projects potential future outcomes using historical data, providing a range of end portfolio values. With a median (50th percentile) projection of 270.6% and a 67th percentile of 381.2%, the outlook is optimistic. However, the 5th percentile at 19.2% suggests there are scenarios where returns could be much lower. While 973 out of 1,000 simulations indicate positive returns, it's important to note that these projections are based on historical data and don't account for unforeseen market changes.

Asset classes Info

  • Stocks
    100%

The portfolio is entirely allocated to stocks, with no exposure to other asset classes like bonds or real estate. While this can enhance growth potential, it also increases risk, as the portfolio lacks the stability that bonds or other fixed-income assets can offer. Compared to a balanced benchmark, this allocation is more aggressive. To reduce risk and improve diversification, consider adding a small percentage of bonds or other asset classes, which could provide a cushion during market downturns.

Sectors Info

  • Technology
    32%
  • Financials
    14%
  • Consumer Discretionary
    11%
  • Health Care
    10%
  • Telecommunications
    9%
  • Industrials
    8%
  • Consumer Staples
    6%
  • Energy
    3%
  • Utilities
    3%
  • Basic Materials
    2%
  • Real Estate
    2%

Sector allocation shows a heavy concentration in technology at 32%, followed by financial services and consumer cyclicals. This tech-heavy focus can lead to higher volatility, especially in rising interest rate environments. While the sector distribution aligns with common benchmarks, the concentration in tech may expose the portfolio to sector-specific risks. Balancing the allocation by increasing exposure to underrepresented sectors like utilities or real estate could help stabilize returns and reduce risk.

Regions Info

  • North America
    90%
  • Europe Developed
    4%
  • Asia Emerging
    2%
  • Japan
    2%
  • Asia Developed
    1%

Geographically, the portfolio is predominantly exposed to North America at 90%, with limited international diversification. This US-centric focus can be beneficial during periods of US market strength but may increase vulnerability to domestic economic downturns. Compared to global benchmarks, the portfolio is underexposed to regions like Europe and Asia. Diversifying geographically by increasing allocations to international equities can help mitigate regional risks and capitalize on growth opportunities in other markets.

Market capitalization Info

  • Mega-cap
    47%
  • Large-cap
    34%
  • Mid-cap
    18%
  • Small-cap
    1%

The portfolio's market capitalization distribution is skewed towards mega and big caps, making up 81% combined. This focus on larger companies can offer stability and steady growth, as these firms are typically well-established. However, it limits exposure to smaller, potentially high-growth companies. Compared to a diversified benchmark, the portfolio has minimal exposure to small and micro caps. Adding more small and medium-cap stocks could enhance growth potential and improve diversification.

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.

Click on the colored dots to explore allocations.

The portfolio can be optimized using the Efficient Frontier, which aims to achieve the best possible risk-return ratio based on the current assets. This optimization focuses on adjusting the allocation between existing assets to improve efficiency. By exploring different combinations of asset weights, the portfolio could potentially achieve higher returns for the same level of risk or lower risk for the same level of returns. It's important to consider personal investment goals and risk tolerance when making such adjustments.

Dividends Info

  • Vanguard S&P 500 ETF 1.30%
  • Vanguard Total International Stock Index Fund ETF Shares 3.10%
  • Weighted yield (per year) 1.48%

The portfolio's dividend yield is 1.48%, with the Vanguard S&P 500 ETF yielding 1.30% and the international ETF yielding 3.10%. While dividends are not the primary focus, they contribute to overall returns and provide a source of income. For investors seeking income, increasing the allocation to high-dividend stocks or funds could be beneficial. However, it's important to balance the desire for income with growth potential, ensuring the portfolio aligns with long-term investment goals.

Ongoing product costs Info

  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.04%

The portfolio's costs are impressively low, with a total expense ratio (TER) of 0.04%. This cost efficiency supports better long-term performance, as lower fees mean more of the returns are retained. Compared to industry averages, these costs are highly competitive, positioning the portfolio well for sustained growth. Maintaining a focus on cost-effective investment options can enhance returns over time. However, it's important to ensure these low-cost options align with the overall investment strategy and risk tolerance.

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