Growth-focused portfolio with high concentration in large-cap US stocks and low diversification

Risk profile

  • Secure
    Speculative

The risk profile, derived from past market volatility, reflects the level of risk the portfolio is exposed to. This assessment helps align your investments with your financial goals and comfort with market fluctuations.

Diversification profile

  • Focused
    Diversified

The diversification assessment evaluates the spread of investments across asset classes, regions, and sectors. This ensures a balanced mix, reducing risk and maximizing returns by not concentrating in any single area.

What type of investor this portfolio is suitable for

Growth Investors

This portfolio suits an investor with a growth-oriented profile, willing to accept higher levels of risk for the potential of significant returns. It's best suited for individuals with a long-term investment horizon who can withstand periods of market volatility without needing to liquidate their investments. The lack of diversification requires a risk tolerance that aligns with the possibility of substantial fluctuations in portfolio value.

Positions

  • FIDELITY LARGE CAP GROWTH INDEX FUND INSTITUTIONAL PREMIUM CLASS
    FSPGX - US31635V7293
    50.00%
  • Fidelity 500 Index Fund
    FXAIX - US3159117502
    50.00%

This portfolio is entirely invested in two funds: the Fidelity Large Cap Growth Index Fund Institutional Premium Class and the Fidelity 500 Index Fund, each constituting 50% of the portfolio. Both funds focus on large-cap stocks, reflecting a strategy that prioritizes growth within the US equity market. The portfolio's lack of asset class and geographic diversification, with 100% allocation to North American stocks, positions it towards the higher end of the risk spectrum, especially given its growth profile. This concentration increases exposure to market volatility and sector-specific risks.

Growth Info

Historically, this portfolio has demonstrated a Compound Annual Growth Rate (CAGR) of 17.74%, with a maximum drawdown of -32.54%. This performance indicates significant growth potential but comes with considerable volatility, as evidenced by the steep drawdown. The days contributing to 90% of returns being concentrated in just 35 days highlights the portfolio's susceptibility to short-term market movements and the importance of staying invested during volatile periods to capture gains.

Projection Info

Monte Carlo simulations, based on 1,000 iterations, suggest a wide range of outcomes for future portfolio values, with a median increase of 882%. While 999 simulations resulted in positive returns, indicating a high likelihood of growth, the significant spread between the 5th and 67th percentiles underscores the portfolio's risk level. It's crucial to remember that such projections, while useful for planning, are based on historical data and cannot guarantee future performance.

Asset classes Info

  • Stocks
    100%
  • Cash
    0%

The portfolio's allocation is solely in stocks, with no presence in other asset classes like bonds or real estate. This singular focus on equities enhances growth potential but also increases risk, as stocks are generally more volatile than other asset classes. Diversifying across different asset classes can help mitigate risk by spreading exposure across investments that react differently to market conditions.

Sectors Info

  • Technology
    41%
  • Consumer Discretionary
    13%
  • Telecommunications
    12%
  • Financials
    10%
  • Health Care
    8%
  • Industrials
    6%
  • Consumer Staples
    5%
  • Energy
    2%
  • Utilities
    1%
  • Real Estate
    1%
  • Basic Materials
    1%

With a heavy emphasis on technology (41%) and significant allocations to consumer cyclical and communication services, the portfolio is positioned to benefit from growth in these sectors. However, this concentration also exposes it to sector-specific downturns. Diversifying across a broader range of sectors could reduce volatility and improve the portfolio's resilience to sector-specific risks.

Regions Info

  • North America
    100%
  • Europe Developed
    0%
  • Latin America
    0%
  • Asia Developed
    0%

The portfolio's geographic allocation is exclusively focused on North America, missing out on potential opportunities in developed and emerging markets outside the US. This geographic concentration increases exposure to US market risks and limits potential gains from global economic growth. Incorporating international equities could offer additional growth prospects and diversification benefits.

Market capitalization Info

  • Mega-cap
    56%
  • Large-cap
    28%
  • Mid-cap
    14%
  • Small-cap
    1%
  • Micro-cap
    0%

The majority of the portfolio is invested in mega (56%) and large-cap (28%) companies, with minimal exposure to medium, small, and micro-cap stocks. This focus on larger companies may offer stability and lower volatility compared to smaller caps, but it also limits potential for higher returns that smaller, more agile companies can provide. Increasing exposure to smaller caps could enhance growth potential and diversification.

Redundant positions Info

  • FIDELITY LARGE CAP GROWTH INDEX FUND INSTITUTIONAL PREMIUM CLASS
    Fidelity 500 Index Fund
    High correlation

The high correlation between the Fidelity Large Cap Growth Index Fund and the Fidelity 500 Index Fund indicates overlapping investments, which reduces the diversification benefits within the portfolio. Diversification across uncorrelated assets can lower risk by ensuring that not all investments are likely to lose value simultaneously during market downturns.

Dividends Info

  • FIDELITY LARGE CAP GROWTH INDEX FUND INSTITUTIONAL PREMIUM CLASS 0.30%
  • Fidelity 500 Index Fund 0.90%
  • Weighted yield (per year) 0.60%

The portfolio's dividend yield is relatively low, with a total yield of 0.60%, reflecting its growth orientation over income generation. While dividends are not the primary focus for growth investors, they can provide a steady income stream and contribute to total returns, especially in volatile or declining markets. Considering investments with higher dividend yields could offer a balance between growth and income.

Ongoing product costs Info

  • FIDELITY LARGE CAP GROWTH INDEX FUND INSTITUTIONAL PREMIUM CLASS 0.04%
  • Fidelity 500 Index Fund 0.02%
  • Weighted costs total (per year) 0.03%

The portfolio benefits from exceptionally low costs, with a total expense ratio (TER) of 0.03%. Low costs are crucial for long-term investment success, as they directly enhance net returns by reducing the drag on performance. This cost efficiency is a strong aspect of the portfolio, supporting better long-term outcomes.

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.

Optimizing this portfolio involves addressing the high correlation between its two holdings to enhance diversification benefits. The current overlap limits the portfolio's ability to mitigate risk through diversification. By reallocating assets to include less correlated investments, the portfolio can achieve a more efficient risk-return profile, potentially moving closer to the Efficient Frontier, where the highest possible return is achieved for a given level of risk.

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