Highly concentrated portfolio with significant exposure to Amazon and limited international diversification

Report created on Jan 12, 2025

Risk profile Info

6/7
Aggressive
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

This portfolio is heavily weighted towards Amazon, comprising over 76% of the allocation, with the rest spread across various ETFs and funds. This concentration in a single stock can lead to increased volatility and risk. While there are some ETFs and funds providing diversification, their impact is limited due to their smaller allocations. Generally, a more balanced portfolio would feature a broader mix of assets to mitigate risk. Consider reducing the Amazon position and increasing exposure to other assets to achieve better diversification and risk management.

Growth Info

Historically, the portfolio has shown impressive returns with a CAGR of 20.78%, but it has also experienced significant volatility, as evidenced by a max drawdown of -48.73%. This indicates that while the portfolio can generate high returns, it is also susceptible to large losses. Comparing this to a benchmark like the S&P 500, which typically has a lower drawdown, highlights the risk of concentration in a single stock. Diversifying away from Amazon could help smooth out performance and reduce the potential for large losses.

Projection Info

The Monte Carlo simulation, which uses historical data to model future outcomes, suggests a wide range of potential returns. With a median return of 344.66% over the simulation period, the portfolio shows strong growth potential. However, it's important to note that past performance doesn't guarantee future results, and the high variability in outcomes reflects the portfolio's risk. Consider using these projections to assess risk tolerance and adjust the portfolio to align with long-term financial goals, perhaps by diversifying holdings.

Asset classes Info

  • Stocks
    100%

The portfolio is almost entirely composed of stocks, with negligible allocations to cash and other assets. While stocks offer growth potential, this lack of diversification across asset classes can increase risk, especially during market downturns. A more balanced portfolio might include bonds or alternative investments to provide stability and reduce volatility. Reassessing the asset class allocation could help align the portfolio with a more moderate risk profile and potentially improve risk-adjusted returns.

Sectors Info

  • Consumer Discretionary
    78%
  • Technology
    4%
  • Financials
    4%
  • Industrials
    3%
  • Health Care
    3%
  • Energy
    2%
  • Consumer Staples
    2%
  • Telecommunications
    1%
  • Basic Materials
    1%
  • Real Estate
    1%
  • Utilities
    1%
  • Consumer Discretionary
    1%

The portfolio is predominantly invested in consumer cyclicals, driven by its heavy Amazon weighting. This sector concentration can lead to increased volatility, particularly during economic downturns, when consumer spending typically declines. A more balanced sector allocation could provide stability and reduce risk. Consider diversifying into sectors like healthcare or utilities, which tend to be less sensitive to economic cycles, to achieve a more stable performance across varying market conditions.

Regions Info

  • North America
    95%
  • Europe Developed
    3%
  • Japan
    1%

With over 94% of the portfolio allocated to North America, geographic diversification is limited. This overexposure to a single region can increase vulnerability to regional economic downturns. A more globally diversified portfolio might include greater exposure to emerging markets and other developed regions, which can provide growth opportunities and reduce risk by spreading exposure across different economic environments. Consider increasing allocations to international funds to achieve a more balanced geographic spread.

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's current composition is not optimized along the Efficient Frontier, which represents the best possible risk-return ratio. Given the high concentration in Amazon, shifting some weight towards other assets could improve this ratio. By reallocating within the existing assets, the portfolio could achieve a more efficient balance between risk and return. Consider exploring optimization strategies to enhance the portfolio's performance without drastically altering its risk profile.

Dividends Info

  • Fidelity® Stocks for Inflation ETF 1.00%
  • Fidelity® MSCI Energy Index ETF 3.00%
  • Schwab U.S. Dividend Equity ETF 3.70%
  • SPDR S&P 500 ETF Trust 0.90%
  • Vanguard Russell 2000 Index Fund ETF Shares 1.20%
  • Weighted yield (per year) 0.30%

The portfolio's overall dividend yield is relatively low at 0.3%, primarily due to the high weighting in Amazon, which does not pay dividends. For investors seeking income, this may be a drawback. Incorporating more dividend-paying stocks or funds could enhance income generation and provide a buffer during market downturns. Consider increasing allocations to ETFs or funds with higher yields to achieve a more balanced mix of growth and income.

Ongoing product costs Info

  • Fidelity® Stocks for Inflation ETF 0.15%
  • FIDELITY DIVERSIFIED INTERNATIONAL FUND FIDELITY DIVERSIFIED INTERNATIONAL FUND 0.59%
  • Fidelity® MSCI Energy Index ETF 0.08%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • SPDR S&P 500 ETF Trust 0.10%
  • Vanguard Russell 2000 Index Fund ETF Shares 0.10%
  • Weighted costs total (per year) 0.03%

The portfolio's costs are impressively low, with a total TER of 0.03%. This is beneficial for long-term performance, as lower costs mean more of the returns are retained. Maintaining a focus on cost-efficient investments can support better net returns over time. Ensure that any changes to the portfolio, such as increasing diversification, do not significantly increase costs. Evaluating cost-effective options, like low-fee ETFs, can help maintain this advantage.

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