A growth-focused portfolio with concentrated exposure to US equities and limited diversification

Report created on Dec 24, 2024

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

This portfolio is heavily weighted towards equities, with 97.78% in stocks and minimal exposure to other asset classes. The Fidelity Contrafund dominates the portfolio at 60%, complemented by the Fidelity ZERO Total Market Index Fund and the Schwab U.S. Large-Cap Growth ETF. Compared to a typical balanced portfolio, this one is concentrated in equities, which can lead to higher returns but also increased volatility. To enhance diversification, consider adding different asset classes such as bonds or real estate, which can reduce risk and provide stability during market downturns.

Growth Info

Historically, the portfolio has achieved a strong Compound Annual Growth Rate (CAGR) of 17.39%, significantly outperforming many benchmarks. However, it also experienced a maximum drawdown of -31.16%, indicating substantial volatility. These figures highlight the potential for high returns but also the risk of significant losses. While past performance is not indicative of future results, maintaining a growth-oriented strategy could continue to yield high returns, but be prepared for potential market fluctuations.

Projection Info

A Monte Carlo simulation, which uses historical data to estimate future outcomes, projects an annualized return of 19.17%. With 1,000 simulations, the portfolio showed positive returns in 991 scenarios, suggesting a high likelihood of growth. However, the simulation's reliance on past data means these projections are not guaranteed. To potentially improve outcomes, consider diversifying asset allocation to mitigate risk and enhance stability across various market conditions.

Asset classes Info

  • Stocks
    98%
  • Other
    1%
  • Cash
    1%

The portfolio's allocation is almost exclusively in stocks, with minimal presence in other asset classes like bonds or cash. This heavy equity concentration aligns with a high-risk, high-reward strategy typical of growth-focused portfolios. For a more balanced approach, incorporating different asset classes could reduce volatility and provide a cushion against market downturns. This diversification can lead to more consistent returns over time.

Sectors Info

  • Technology
    31%
  • Telecommunications
    18%
  • Financials
    15%
  • Health Care
    11%
  • Consumer Discretionary
    8%
  • Industrials
    6%
  • Consumer Discretionary
    3%
  • Consumer Staples
    3%
  • Energy
    2%
  • Utilities
    2%
  • Basic Materials
    2%
  • Real Estate
    1%

The portfolio is heavily concentrated in technology and communication services, together making up nearly 50% of the allocation. This sectoral skew can lead to increased volatility, especially during periods of technological disruption or regulatory changes. To mitigate sector-specific risks, consider diversifying into underrepresented sectors such as utilities or basic materials, which may offer more stable returns and counterbalance the high volatility of tech stocks.

Regions Info

  • North America
    98%
  • Europe Developed
    1%

With 97.91% of assets in North America, the portfolio has limited geographic diversification. This concentration increases exposure to regional economic and political risks. Expanding geographic exposure to regions like Europe, Asia, or emerging markets could enhance diversification and provide access to growth opportunities in different economic cycles. A more balanced geographic allocation can help mitigate risks associated with any single region.

Redundant positions Info

  • Fidelity Contrafund
    Schwab U.S. Large-Cap Growth ETF
    High correlation

The portfolio includes highly correlated assets, particularly the Fidelity Contrafund and Schwab U.S. Large-Cap Growth ETF. High correlation means these assets tend to move in the same direction, limiting diversification benefits. Reducing overlap by selecting funds or ETFs with different investment strategies or sector focuses can enhance diversification. This approach can help manage risk more effectively during market downturns.

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 can potentially be optimized using the Efficient Frontier, which balances risk and return for a given set of assets. However, before optimization, addressing the high correlation and sector concentration is crucial. By reducing overlap and diversifying sectors, the portfolio can achieve a better risk-return balance. This optimization focuses on maximizing returns for a given level of risk, enhancing overall portfolio efficiency.

Dividends Info

  • Fidelity Contrafund 4.10%
  • FIDELITY ZERO TOTAL MARKET INDEX FUND 1.20%
  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • Weighted yield (per year) 2.78%

The portfolio's total dividend yield is 2.78%, with the Fidelity Contrafund contributing a substantial 4.1%. Dividends can provide a steady income stream, which is beneficial for reinvestment or income-focused strategies. However, the focus on growth suggests dividends are a secondary consideration. If income is a priority, consider increasing exposure to dividend-focused funds or stocks to enhance yield and provide more consistent returns.

Ongoing product costs Info

  • Fidelity Contrafund 0.39%
  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • Weighted costs total (per year) 0.24%

With a Total Expense Ratio (TER) of 0.24%, this portfolio is relatively cost-effective, especially given the growth focus. Lower costs can significantly enhance long-term returns by reducing the drag on performance. Maintaining a low-cost structure is advantageous, but it's essential to ensure that cost-saving measures do not compromise diversification or asset quality. Regularly reviewing and optimizing costs can further improve net returns.

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