Balanced Portfolio with Moderate Diversification and High Correlation Between Some Assets

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

Balanced Investors

This portfolio suits a balanced investor seeking moderate growth with some stability. Such investors typically have a medium-term investment horizon and a moderate risk tolerance. They aim to achieve steady growth while managing risk through diversification across asset classes and sectors. Balanced investors appreciate the potential for capital appreciation but also value the stability provided by bonds and other lower-risk assets. They are comfortable with some market volatility but prefer a diversified approach to mitigate risks. This type of investor is focused on achieving long-term financial goals while maintaining a manageable level of risk.

Positions

  • Fidelity® Blue Chip Value ETF
    FBCV - US3160923450
    40.00%
  • Fidelity Covington Trust - Fidelity Women's Leadership ETF
    FDWM - US3160922874
    20.00%
  • Fidelity Covington Trust - Fidelity Clean Energy ETF
    FRNW
    20.00%
  • Fidelity® Total Bond ETF
    FBND - US3161883091
    10.00%
  • Fidelity® Low Volatility Factor ETF
    FDLO - US3160928244
    10.00%

The portfolio comprises five ETFs, with a significant allocation towards Fidelity® Blue Chip Value ETF at 40%. The rest is divided among Fidelity Covington Trust - Fidelity Women's Leadership ETF and Fidelity Clean Energy ETF, both at 20%, while Fidelity® Total Bond ETF and Fidelity® Low Volatility Factor ETF each hold 10%. This composition reflects a moderately diversified approach with a mix of equity and bond investments. The allocation suggests a balanced strategy, aiming to capture growth while maintaining some stability through bonds. To enhance diversification, consider balancing the allocation more evenly across different funds.

Growth Info

Historically, the portfolio has delivered a CAGR of 3.58%, with a maximum drawdown of -19.81%. This indicates moderate growth potential with some volatility. The performance suggests that while the portfolio has experienced growth, it has also faced significant downturns. For a balanced portfolio, these figures are within an acceptable range, though there's room for improvement. To enhance performance, consider strategies that could potentially reduce drawdowns while maintaining or improving returns. This could involve reassessing the asset mix or exploring alternative investment strategies that align with the risk profile.

Projection Info

Using a Monte Carlo simulation with 1,000 iterations, the portfolio's future performance was projected. The simulation provides a range of potential outcomes, with the 5th percentile showing a -62.99% return, the median at 16.2%, and the 67th percentile at 56.56%. With 586 simulations showing positive returns, the annualized return is 2.74%. This highlights the uncertainty and variability in potential outcomes. Monte Carlo simulations are useful for understanding risk and return scenarios. Consider using this data to evaluate if the current risk level aligns with investment goals and if adjustments are necessary to improve the probability of achieving desired outcomes.

Asset classes Info

  • Stocks
    89%
  • Bonds
    10%
  • Cash
    2%
  • No data
    0%

The asset class allocation is primarily in stocks at 89%, with bonds making up nearly 10% and a small cash component. This reflects a growth-oriented strategy with a minor allocation to bonds for stability. While this allocation can offer growth potential, it also introduces higher volatility. For those seeking to balance growth and risk, consider increasing the bond allocation to provide more stability and income. Alternatively, for those comfortable with higher risk, maintaining or increasing the stock allocation could be suitable. Adjusting the asset class mix can help align the portfolio with specific risk tolerance and investment objectives.

Sectors Info

  • Technology
    18%
  • Utilities
    14%
  • Financials
    13%
  • Health Care
    12%
  • Industrials
    11%
  • Consumer Discretionary
    6%
  • Consumer Staples
    5%
  • Telecommunications
    4%
  • Energy
    4%
  • Basic Materials
    1%
  • Real Estate
    1%

The sector allocation is diverse, with significant exposure to technology, utilities, and financial services. This diversification across sectors can help mitigate risk associated with sector-specific downturns. However, certain sectors like basic materials and real estate have minimal representation. While sector diversification is beneficial, it's crucial to ensure that the allocation aligns with broader market trends and personal investment goals. Consider reviewing sector exposures periodically to identify any imbalances or opportunities for reallocation that could enhance returns or reduce risk. This approach helps maintain a well-rounded and resilient portfolio.

Regions Info

  • North America
    75%
  • Europe Developed
    11%
  • Asia Emerging
    3%
  • Australasia
    1%
  • Asia Developed
    0%
  • Africa/Middle East
    0%
  • Japan
    0%

Geographically, the portfolio is heavily weighted towards North America, comprising nearly 75% of the allocation. This reflects a strong home bias, which can be beneficial given the region's economic stability. However, exposure to other regions like Europe Developed and Asia Emerging is relatively limited. Geographic diversification can be a valuable tool for reducing risk and capturing growth opportunities in different markets. Consider increasing exposure to underrepresented regions to enhance diversification and potentially benefit from global economic trends. This can help mitigate risks associated with regional economic downturns and enhance long-term growth potential.

Redundant positions Info

  • Fidelity® Low Volatility Factor ETF
    Fidelity Covington Trust - Fidelity Women's Leadership ETF
    High correlation

The portfolio contains highly correlated assets, particularly between the Fidelity® Low Volatility Factor ETF and the Fidelity Women's Leadership ETF. High correlation between assets can reduce diversification benefits, potentially increasing portfolio risk. When assets move in tandem, it limits the portfolio's ability to withstand market fluctuations. To improve diversification, consider reducing exposure to highly correlated assets or introducing new assets with low correlation to existing holdings. This can help achieve a more balanced portfolio, enhancing risk-adjusted returns and providing better protection against market volatility.

Dividends Info

  • Fidelity® Blue Chip Value ETF 1.60%
  • Fidelity® Total Bond ETF 4.60%
  • Fidelity® Low Volatility Factor ETF 1.30%
  • Fidelity Covington Trust - Fidelity Women's Leadership ETF 0.60%
  • Fidelity Covington Trust - Fidelity Clean Energy ETF 1.40%
  • Weighted yield (per year) 1.63%

The portfolio's dividend yield is 1.63%, with the Fidelity® Total Bond ETF contributing the highest yield at 4.6%. Dividends provide a steady income stream and can be a valuable component of total returns. The current yield indicates a moderate level of income generation. For investors seeking higher income, consider increasing exposure to high-dividend-paying assets. Alternatively, for those focused on growth, maintaining the current yield may be sufficient. Regularly reviewing dividend yields and income requirements can help ensure the portfolio continues to meet financial goals and provides the desired level of income.

Ongoing product costs Info

  • Fidelity® Blue Chip Value ETF 0.59%
  • Fidelity® Total Bond ETF 0.36%
  • Fidelity® Low Volatility Factor ETF 0.15%
  • Fidelity Covington Trust - Fidelity Women's Leadership ETF 0.59%
  • Fidelity Covington Trust - Fidelity Clean Energy ETF 0.39%
  • Weighted costs total (per year) 0.48%

The total expense ratio (TER) of the portfolio is 0.48%, with individual fund costs ranging from 0.15% to 0.59%. These costs are relatively moderate, reflecting a cost-effective approach to investing. Keeping investment costs low is crucial for maximizing net returns. While the current TER is reasonable, it's essential to continually monitor and assess fees to ensure they remain competitive. Consider exploring opportunities to reduce costs further, such as switching to lower-cost funds or negotiating fees. This can help enhance overall portfolio performance and contribute to achieving long-term financial 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.

Before optimizing the portfolio, it's crucial to address the high correlation between certain assets, as overlapping positions can reduce diversification benefits. By removing or adjusting these positions, the portfolio can achieve better diversification and potentially improve risk-adjusted returns. Once this is addressed, optimization along the efficient frontier can be considered. Moving towards a riskier portfolio involves increasing the allocation to equities, while a more conservative approach would involve a higher allocation to bonds. The key is to find a balance that aligns with the investor's risk tolerance and financial goals, ensuring a well-optimized portfolio.

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