A highly diversified growth portfolio with strong US focus and moderate risk exposure

Report created on Jan 9, 2025

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

5/5
Highly Diversified
Less diversification More diversification

Positions

The portfolio consists primarily of equity funds, with a strong emphasis on US markets. Notably, it includes the BlackRock S&P 500 Stock Fund (30.4%) and the Fidelity Total Market Index Fund (26.2%). This composition suggests a focus on growth with a significant allocation to stocks. Compared to common benchmarks, the portfolio is well-aligned with a typical growth strategy but lacks exposure to alternative asset classes like real estate or commodities. Consider adding such assets to enhance diversification and potentially mitigate risk during market volatility.

Growth Info

Historically, the portfolio has performed well, with a Compound Annual Growth Rate (CAGR) of 13.38%. This indicates strong growth over time, outperforming many traditional benchmarks. However, it experienced a maximum drawdown of -32.54%, highlighting vulnerability during market downturns. While past performance demonstrates potential, it’s crucial to remember that historical data doesn’t guarantee future results. Regularly reviewing performance against personal goals and risk tolerance can ensure the portfolio remains aligned with your investment strategy.

Projection Info

Forward projections using Monte Carlo simulations suggest an annualized return of 11.29%. Monte Carlo analysis uses historical data to simulate a range of potential future outcomes, providing insight into possible returns. However, these projections are not predictions and carry inherent uncertainties. With a 5th percentile outcome at 30.42% and a 67th percentile at 391.52%, the portfolio could experience varied results. It's important to use these projections as a guide rather than a certainty, adjusting the portfolio as needed to align with changing financial goals.

Asset classes Info

  • Stocks
    94%
  • Bonds
    5%

The portfolio is heavily weighted towards stocks (94.3%), with minimal allocation to bonds (5.4%). This indicates a strong growth orientation but may lack stability during market fluctuations. Compared to balanced portfolios, this allocation is riskier but offers higher growth potential. To reduce risk, consider increasing bond exposure or adding other asset classes like real estate or commodities. This can provide a buffer against volatility, offering more stable returns without sacrificing growth opportunities.

Sectors Info

  • Technology
    26%
  • Financials
    14%
  • Health Care
    10%
  • Consumer Discretionary
    10%
  • Industrials
    9%
  • Telecommunications
    8%
  • Consumer Staples
    6%
  • Energy
    4%
  • Basic Materials
    3%
  • Utilities
    3%
  • Real Estate
    3%

The portfolio is tech-heavy, with technology stocks making up 26% of the allocation. Other significant sectors include financial services (14.3%) and healthcare (10.2%). While this sector composition aligns with major benchmarks, such concentration in technology could lead to higher volatility, especially during periods of interest rate changes or regulatory shifts. To balance this, consider diversifying across underrepresented sectors like utilities or consumer defensive, which can provide stability during economic downturns.

Regions Info

  • North America
    73%
  • Europe Developed
    9%
  • No data
    5%
  • Asia Emerging
    4%
  • Japan
    3%
  • Asia Developed
    3%
  • Australasia
    1%
  • Africa/Middle East
    1%
  • Latin America
    1%

Geographically, the portfolio is predominantly focused on North America (73.1%), with limited exposure to emerging markets. This concentration aligns with many US-based benchmarks but may miss out on growth opportunities in rapidly developing regions. Expanding geographic exposure, particularly in Asia or Latin America, could enhance diversification and tap into potential growth markets. This approach can help mitigate regional risks and capitalize on global economic trends, offering a broader safety net against regional downturns.

Redundant positions Info

  • BlackRock S&P 500 Stock Fund Instl
    Fidelity Total Market Index Fund
    Vanguard Total World Stock Index Fund
    High correlation

The portfolio contains highly correlated assets, particularly among the BlackRock S&P 500, Fidelity Total Market, and Vanguard Total World funds. High correlation means these assets tend to move together, which can limit diversification benefits. In market downturns, correlated assets may all decline simultaneously, increasing risk. To enhance diversification, consider replacing some correlated funds with less correlated ones, potentially including alternative asset classes or regions. This strategy can improve risk management and provide a more balanced portfolio.

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 portfolio could benefit from optimization using the Efficient Frontier, which seeks the best risk-return ratio. Current assets and allocations suggest room for improvement by reducing correlated holdings and adjusting sector or geographic weights. Efficiency refers to achieving the highest possible return for a given level of risk, not necessarily diversification. By optimizing, the portfolio can potentially enhance returns while maintaining or reducing risk. Regularly reassessing asset allocations and rebalancing can ensure ongoing alignment with financial goals.

Dividends Info

  • BlackRock S&P 500 Stock Fund Instl 0.90%
  • Fidelity Total Market Index Fund 0.20%
  • VANGUARD INTERMEDIATE-TERM BOND INDEX FUND ADMIRAL SHARES 3.50%
  • Vanguard Total World Stock Index Fund 1.20%
  • Weighted yield (per year) 0.80%

The portfolio's dividend yield is relatively low at 0.8%, with the Vanguard Intermediate-Term Bond Index Fund contributing a 3.5% yield. While growth-focused portfolios typically prioritize capital appreciation over income, dividends can provide a steady income stream and reduce overall portfolio volatility. If income generation is a goal, consider increasing allocation to dividend-paying stocks or funds. This can balance growth with income, offering more consistent returns and potentially enhancing long-term performance.

Ongoing product costs Info

  • BlackRock S&P 500 Stock Fund Instl 0.10%
  • Fidelity Total Market Index Fund 0.02%
  • FIDELITY TOTAL INTERNATIONAL INDEX FUND INSTITUTIONAL PREMIUM CLASS 0.06%
  • VANGUARD INTERMEDIATE-TERM BOND INDEX FUND ADMIRAL SHARES 0.07%
  • Vanguard Total World Stock Index Fund 0.10%
  • Weighted costs total (per year) 0.07%

With a Total Expense Ratio (TER) of 0.07%, the portfolio's costs are impressively low, supporting better long-term performance. Lower costs mean more of your returns stay invested, compounding over time. This cost efficiency aligns well with best practices, ensuring that fees do not erode gains. Continue monitoring fund expenses and explore opportunities to reduce costs further, such as switching to lower-cost index funds or ETFs. Maintaining low costs is crucial for maximizing net returns over the investment horizon.

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