A growth-focused portfolio with high technology exposure and low geographic diversification

Report created on Feb 12, 2025

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

The portfolio is heavily weighted towards U.S. equities, with a significant portion in the Fidelity Zero Total Market Index Fund, making up 40% of the portfolio. This is complemented by three ETFs focused on small-cap value, information technology, and large-cap growth, each contributing 20%. Compared to a typical diversified benchmark, this portfolio shows a strong preference for growth, but lacks diversification across asset classes and geography. To enhance diversification, consider incorporating other asset classes such as bonds or international equities, which can provide a buffer against U.S. market-specific risks.

Growth Info

Historically, the portfolio has demonstrated impressive growth, with a Compound Annual Growth Rate (CAGR) of 19.71%. However, it has also experienced a significant maximum drawdown of -35.86%, indicating vulnerability to market downturns. The concentrated nature of the returns, with 90% occurring over just 21 days, highlights the portfolio's dependence on specific market conditions. While past performance is not indicative of future results, understanding these patterns can help in preparing for potential volatility. Regularly reviewing asset allocation and considering more defensive assets could mitigate future drawdowns.

Projection Info

Monte Carlo simulation, a tool that uses historical data to predict future outcomes, shows a wide range of potential portfolio values. With 1,000 simulations, the 5th percentile projects a 137.6% return, while the median is 1,105.4%. This indicates strong potential growth, but also highlights the uncertainty and risk involved. The high annualized return of 22.63% among simulations suggests optimism, yet it's crucial to remember that these projections are not guarantees. Diversifying further could help stabilize returns across different scenarios, reducing reliance on any single outcome.

Asset classes Info

  • Stocks
    100%

The portfolio is exclusively composed of stocks, with no allocation to other asset classes such as bonds or cash. This 100% equity allocation aligns with a high-risk, high-reward strategy typical of growth-focused portfolios. However, it also means the portfolio could be more volatile, especially during market downturns. Diversifying into bonds or other fixed-income assets can provide more stability and reduce overall risk. This approach can help balance the pursuit of growth with the need for risk management, especially for investors nearing their financial goals.

Sectors Info

  • Technology
    44%
  • Financials
    12%
  • Industrials
    8%
  • Health Care
    7%
  • Telecommunications
    6%
  • Consumer Discretionary
    6%
  • Energy
    5%
  • Consumer Discretionary
    4%
  • Consumer Staples
    3%
  • Basic Materials
    2%
  • Real Estate
    1%
  • Utilities
    1%

The portfolio is heavily weighted towards the technology sector, which comprises 44% of the total allocation. This concentration can lead to higher volatility, especially in times of regulatory changes or tech market corrections. Other sectors like financial services and industrials are present but significantly less weighted. Aligning sector allocation with broader market benchmarks can help mitigate sector-specific risks and provide a more balanced growth potential. Consider gradually increasing exposure to underrepresented sectors to enhance diversification and reduce reliance on the tech sector's performance.

Regions Info

  • North America
    99%

Geographically, the portfolio is almost entirely concentrated in North America, with 99% of the assets allocated there. This lack of international exposure limits diversification and increases vulnerability to U.S.-specific economic or political changes. Diversifying geographically by including assets from Europe, Asia, or emerging markets could reduce regional risk and tap into growth opportunities abroad. This approach can help balance the portfolio and potentially enhance returns by leveraging global economic trends.

Market capitalization Info

  • Mega-cap
    40%
  • Large-cap
    22%
  • Small-cap
    15%
  • Mid-cap
    13%
  • Micro-cap
    10%

The portfolio's allocation spans across various market capitalizations, with a significant 40% in mega-cap stocks and 22% in large caps. Small and micro-cap stocks also have notable representation, which can drive growth but also add volatility. This diverse market cap allocation supports growth, yet the concentration in mega and large caps could limit the benefits of small-cap volatility. Balancing the allocation among different market caps can optimize risk and return, providing a more stable growth trajectory.

Redundant positions Info

  • Fidelity® MSCI Information Technology Index ETF
    Schwab U.S. Large-Cap Growth ETF
    High correlation

The portfolio contains assets with high correlation, particularly between the Fidelity MSCI Information Technology Index ETF and the Schwab U.S. Large-Cap Growth ETF. This correlation can limit diversification benefits, as these assets tend to move in tandem, especially during downturns. Diversifying into less correlated assets can improve risk management and enhance the portfolio's resilience. Consider replacing some highly correlated positions with those that have historically shown different movement patterns to achieve a more balanced risk profile.

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 portfolio could benefit from optimization using the Efficient Frontier, focusing on the best possible risk-return ratio. This involves adjusting the allocation between existing assets to achieve a more efficient portfolio. However, the presence of highly correlated assets may limit the effectiveness of this optimization. Before proceeding, consider replacing or reducing these overlaps to enhance the diversification benefits. This strategic reallocation can help achieve a more balanced risk-return profile, aligning with growth objectives while managing risk.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.60%
  • Fidelity® MSCI Information Technology Index ETF 0.50%
  • FIDELITY ZERO TOTAL MARKET INDEX FUND 1.10%
  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • Weighted yield (per year) 0.94%

The portfolio features a modest dividend yield of 0.94%, with contributions from the Avantis U.S. Small Cap Value ETF and the Fidelity Zero Total Market Index Fund. While the focus is on growth, dividends can provide a steady income stream, particularly useful during market volatility. For investors seeking income alongside growth, increasing exposure to higher dividend-yielding assets could be beneficial. However, it's important to balance this with the overall growth strategy to ensure the portfolio aligns with long-term financial goals.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Fidelity® MSCI Information Technology Index ETF 0.08%
  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • Weighted costs total (per year) 0.07%

The portfolio's total expense ratio (TER) is impressively low at 0.07%, which supports better long-term performance by minimizing costs. This low-cost structure is a strong advantage, as it allows more of the portfolio's returns to be retained by the investor. Keeping costs low is crucial in maximizing net returns, especially over long investment horizons. Continue to monitor and manage costs, ensuring that any new additions to the portfolio maintain this efficient cost structure.

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