Single fund growth-focused portfolio with high risk and low geographic diversification
Report created on Dec 12, 2024Risk profile
5/7
Diversification profile
2/5
Positions
-
FN FIDELITY ZERO LARGE CAP INDEX FUND
FNILX 100.00%
This portfolio is entirely invested in the Fidelity Zero Large Cap Index Fund, which focuses on large-cap stocks. With 100% allocation to a single fund, the portfolio lacks diversification across different asset types, making it heavily reliant on the performance of large-cap stocks. While this can lead to significant growth potential, it also exposes the investor to higher risk if large-cap stocks underperform. To mitigate this risk, consider adding other asset classes like bonds or international equities to achieve a more balanced portfolio.
Growth
Historically, this portfolio has demonstrated strong performance, with a compound annual growth rate (CAGR) of 15.8%. This impressive growth indicates the potential for substantial returns over time. However, the portfolio also experienced a maximum drawdown of -33.72%, highlighting its vulnerability during market downturns. Such volatility is typical for a growth-focused portfolio, emphasizing the need for a long-term investment horizon to weather short-term fluctuations. Investors should be prepared for potential losses while focusing on long-term growth.
Projection
Using Monte Carlo simulations, the portfolio's potential future performance was analyzed, projecting a wide range of possible outcomes. The simulations suggest an annualized return of 17.11%, with a 5th percentile return of 126.29% and a 50th percentile return of 620.81%. While these projections offer valuable insights, they are based on historical data and assumptions that may not hold in the future. Investors should treat these projections as one of many tools in their decision-making process, rather than a guarantee of future performance.
Asset classes
- Stocks 100%
The portfolio's allocation is heavily skewed towards stocks, with 99.96% invested in equities and a negligible amount in cash. This concentration in a single asset class limits diversification and exposes the investor to market volatility. While stocks offer high growth potential, they also come with increased risk. Diversifying across multiple asset classes, such as bonds or real estate, can help reduce risk and create a more balanced portfolio. This approach can provide stability and protect against adverse market conditions.
Sectors
- Technology 34%
- Financials 13%
- Health Care 11%
- Consumer Discretionary 10%
- Telecommunications 9%
- Industrials 8%
- Consumer Staples 6%
- Energy 3%
- Utilities 3%
- Real Estate 2%
- Basic Materials 2%
The sector allocation within the portfolio is concentrated, with technology accounting for 33.6%, followed by financial services and healthcare. This concentration can lead to higher returns if these sectors perform well, but it also increases risk if they face downturns. To enhance diversification, consider reallocating some of the portfolio to underrepresented sectors like real estate or utilities. This reallocation can help balance exposure and reduce sector-specific risks, providing a more stable investment experience.
Regions
- North America 99%
Geographically, the portfolio is almost entirely focused on North America, with 99.46% of its assets allocated there. This lack of international exposure limits the benefits of geographic diversification, which can help mitigate risk by spreading investments across different economic regions. To increase diversification and reduce reliance on the North American market, consider adding international equities or funds with exposure to Europe and Asia. This approach can provide opportunities for growth in other regions and enhance the portfolio's resilience.
Dividends
- FIDELITY ZERO LARGE CAP INDEX FUND 1.00%
- Weighted yield (per year) 1.00%
The Fidelity Zero Large Cap Index Fund offers a modest dividend yield of 1.0%, contributing to the portfolio's overall return. While dividends provide a steady income stream, they are not the primary driver of growth for this portfolio. Investors seeking higher income may need to look beyond this fund and consider adding dividend-focused investments. Balancing growth and income can help meet different financial goals, providing both capital appreciation and regular income.
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