A balanced portfolio with strong US focus and technology sector concentration
Report created on Jan 10, 2025Risk profile
4/7
Diversification profile
2/5
Positions
-
FX Fidelity 500 Index Fund
FXAIX - US3159117502 85.71% -
QQ Invesco NASDAQ 100 ETF
QQQM - US46138G6492 14.29%
This portfolio is heavily weighted towards equities, with 99.99% in stocks and a small cash component. The significant allocation to the Fidelity 500 Index Fund (85.71%) and Invesco NASDAQ 100 ETF (14.29%) indicates a focus on large-cap US equities, reflecting a common benchmark composition. While this provides exposure to established companies, the lack of diversification across asset classes could increase vulnerability to market fluctuations. To enhance diversification, consider incorporating other asset classes such as bonds or international equities, which can help mitigate risk and provide stability during market downturns.
Growth
The portfolio's historical performance shows a Compound Annual Growth Rate (CAGR) of 15.39%, which is impressive. However, it also experienced a maximum drawdown of -25.86%, indicating significant volatility. While past performance highlights potential for high returns, it also underscores the risk of large losses. Comparing this to benchmark indices, the returns are competitive, but the drawdown suggests a need for caution. Diversifying into less volatile assets could help reduce future drawdowns, balancing the pursuit of high returns with the need for capital preservation.
Projection
The Monte Carlo simulation, which uses historical data to estimate future performance, projects a wide range of potential outcomes. With a median return of 633.4% and 997 simulations showing positive returns, the outlook appears optimistic. However, it's important to note that these projections are based on historical trends and do not guarantee future results. The 5th percentile outcome of 110.75% highlights the possibility of lower returns. To better manage expectations, consider regular portfolio reviews and adjustments to align with evolving market conditions and personal investment goals.
Asset classes
- Stocks 100%
The portfolio's allocation is almost entirely in stocks, with a negligible cash position. This lack of diversification across asset classes means the portfolio is highly susceptible to equity market volatility. While equities offer growth potential, incorporating other asset classes like bonds or real estate can provide income and reduce overall risk. Comparing this to benchmark norms, which often include a mix of stocks and bonds, suggests a need for greater balance to achieve a more stable risk-return profile.
Sectors
- Technology 36%
- Financials 11%
- Health Care 10%
- Telecommunications 10%
- Consumer Discretionary 9%
- Industrials 7%
- Consumer Staples 6%
- Energy 3%
- Utilities 2%
- Consumer Discretionary 2%
- Real Estate 2%
- Basic Materials 2%
Sector allocation reveals a heavy concentration in technology (35.56%), followed by financial services (11.14%) and healthcare (10.31%). This concentration in tech can lead to higher volatility, especially during periods of interest rate changes. While the exposure to various sectors is beneficial, the portfolio could benefit from a more even distribution to avoid over-reliance on tech. Rebalancing to increase weights in underrepresented sectors like utilities or real estate could enhance stability and reduce sector-specific risks.
Regions
- North America 99%
- Europe Developed 1%
Geographically, the portfolio is overwhelmingly focused on North America (99.15%), with minimal exposure to other regions. This lack of international diversification can limit growth opportunities and increase vulnerability to local economic downturns. Comparing this to global benchmarks, which typically have more balanced geographic allocations, suggests the need for broader exposure. Expanding into developed and emerging markets could capture growth potential outside the US and provide a hedge against domestic market volatility.
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 current asset allocation may not be optimized along the Efficient Frontier, which represents the best possible risk-return trade-off. While the portfolio's high equity exposure offers substantial growth potential, it also increases risk. By adjusting allocations between existing assets to achieve a more efficient mix, the portfolio could potentially improve its risk-return ratio. This optimization focuses solely on balancing current assets without necessarily adding new ones, aiming for the best possible performance given the risk tolerance.
Dividends
- Fidelity 500 Index Fund 1.20%
- Invesco NASDAQ 100 ETF 0.60%
- Weighted yield (per year) 1.11%
The portfolio's dividend yield is 1.11%, with contributions from the Fidelity 500 Index Fund (1.2%) and Invesco NASDAQ 100 ETF (0.6%). While dividends offer a steady income stream, the yield is relatively modest, reflecting the growth-oriented nature of the portfolio. For investors seeking higher income, incorporating dividend-focused funds or stocks could enhance yield. However, it's crucial to balance the pursuit of income with growth objectives to maintain overall portfolio alignment.
Ongoing product costs
- Fidelity 500 Index Fund 0.02%
- Invesco NASDAQ 100 ETF 0.15%
- Weighted costs total (per year) 0.04%
The portfolio's Total Expense Ratio (TER) is impressively low at 0.04%, thanks to the low-cost Fidelity 500 Index Fund (0.02%) and Invesco NASDAQ 100 ETF (0.15%). Keeping costs minimal supports better long-term returns, as fees can significantly erode gains over time. This cost efficiency aligns well with best practices and enhances the portfolio's overall performance. Continuously monitoring and managing expenses will ensure that cost advantages are maintained.
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