A growth-focused portfolio with low diversification and high North American exposure

Report created on Jan 9, 2025

Risk profile Info

5/7
Growth
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Diversification profile Info

2/5
Low Diversity
← Less diversification More diversification →

Positions

The portfolio consists of two main components: the Fidelity 500 Index Fund at 80% and the Avantis U.S. Small Cap Value ETF at 20%. This allocation heavily favors large-cap U.S. stocks, which is typical for growth-oriented portfolios. However, the lack of diversity is notable compared to more balanced portfolios that might include international equities, bonds, or alternative assets. To enhance diversification, consider incorporating additional asset classes or geographic regions, which could spread risk and potentially stabilize returns.

Growth Info

Historically, the portfolio has shown impressive performance with a compound annual growth rate (CAGR) of 17.13%. This strong growth is indicative of the underlying asset's robust performance, particularly in the U.S. market. However, it's essential to remember that past performance does not guarantee future results. The portfolio's max drawdown of -36.1% highlights the potential for significant losses during market downturns. To mitigate this risk, consider strategies that can provide downside protection.

Projection Info

A Monte Carlo simulation, which uses historical data to project potential future outcomes, suggests a wide range of possible returns for this portfolio. The median (50th percentile) projection indicates a substantial 713.07% return, but the 5th percentile warns of a much lower 50.24% return. While simulations offer valuable insights, they are not foolproof, as they rely on historical data that may not predict future market conditions. Regularly reviewing and adjusting the portfolio based on changing market dynamics can be beneficial.

Asset classes Info

  • Stocks
    100%

The portfolio is overwhelmingly composed of stocks, accounting for nearly 100% of the total allocation. This heavy concentration in equities aligns with a growth-focused strategy but limits diversification, especially in volatile markets. Diversification across different asset classes like bonds or real assets can help reduce risk and provide more stable returns. Rebalancing the portfolio to include a mix of asset classes could enhance its resilience against market fluctuations.

Sectors Info

  • Technology
    28%
  • Financials
    16%
  • Industrials
    10%
  • Health Care
    9%
  • Consumer Discretionary
    8%
  • Telecommunications
    8%
  • Consumer Staples
    6%
  • Energy
    6%
  • Consumer Discretionary
    3%
  • Basic Materials
    3%
  • Utilities
    2%
  • Real Estate
    2%

Sector allocation shows a significant tilt towards technology at 27.71%, followed by financial services and industrials. Such concentration can lead to higher volatility, especially if specific sectors underperform. While tech has driven growth recently, it's crucial to maintain a balanced sector exposure to mitigate risks associated with sector-specific downturns. Consider diversifying into sectors that are currently underrepresented, which could provide stability and potential growth opportunities.

Regions Info

  • North America
    99%
  • Europe Developed
    1%

The portfolio's geographic exposure is heavily skewed towards North America, with 99.13% of assets invested there. This concentration limits exposure to growth opportunities in other regions like Europe, Asia, and emerging markets. While the U.S. market has been a strong performer, geographic diversification can reduce risk and capture growth from different economic cycles. Expanding geographic exposure could enhance diversification and potential returns.

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 can be optimized using the Efficient Frontier, which identifies the best possible risk-return ratio. This involves adjusting the weights of existing assets to achieve maximum returns for a given level of risk. While this portfolio is already growth-oriented, exploring optimization strategies could help improve its efficiency. Regularly revisiting and adjusting the allocation based on market conditions can ensure continued alignment with your investment goals.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.60%
  • Fidelity 500 Index Fund 1.20%
  • Weighted yield (per year) 1.28%

The portfolio's dividend yield is relatively modest at 1.28%, reflecting its growth orientation. Dividends can provide a steady income stream, which is beneficial for investors seeking regular cash flow. While growth stocks typically offer lower dividends, incorporating higher-yielding assets could enhance income without sacrificing growth potential. Evaluate whether increasing dividend exposure aligns with your financial goals and risk tolerance.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Fidelity 500 Index Fund 0.02%
  • Weighted costs total (per year) 0.07%

The total expense ratio (TER) of the portfolio is impressively low at 0.07%, with the Fidelity 500 Index Fund contributing most of the cost efficiency. Low costs are crucial for long-term investment success as they preserve more of your returns. Maintaining a focus on cost-effective funds is a positive aspect of this portfolio. Regularly reviewing fund expenses and seeking lower-cost alternatives can further enhance returns over time.

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