A balanced and diversified portfolio with a focus on US equities and low-cost investments

Report created on Jan 5, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

5/5
Highly Diversified
Less diversification More diversification

Positions

This portfolio is predominantly composed of US equities, with a significant 64.3% allocation to the Fidelity 500 Index Fund. International exposure is provided by the Fidelity Zero International Index Fund at 23.5%, while bonds make up 12.2% through the Fidelity U.S. Bond Index Fund. This composition mirrors a common balanced portfolio, blending growth potential with income stability. The heavy tilt towards equities is typical for those seeking moderate growth. Consider gradually increasing bond allocation if a more conservative stance is desired, especially as retirement approaches or if market volatility increases.

Growth Info

Historically, the portfolio has performed well with a Compound Annual Growth Rate (CAGR) of 11.2%. This strong past performance suggests effective asset selection, especially given the low-cost index funds used. However, the max drawdown of -29.81% indicates potential for significant volatility. Comparing this to a benchmark, such as the S&P 500, which has similar drawdown characteristics, shows that the portfolio's risk-return profile is consistent with market expectations. Be mindful that past performance does not guarantee future results, and maintaining diversification can help mitigate future risks.

Projection Info

The forward projection, using Monte Carlo simulations, suggests a wide range of potential outcomes. With 1,000 simulations, the median (50th percentile) projection is a robust 138.78% return, but the 5th percentile shows a potential downside of -13.22%. This indicates potential volatility, but the high count of simulations with positive returns (932) implies a favorable outlook. Remember, these projections are based on historical data, which can be an imperfect predictor of future performance. Regularly reviewing and adjusting the portfolio in response to changing market conditions is advisable.

Asset classes Info

  • Stocks
    88%
  • Bonds
    12%

The portfolio's allocation across asset classes is predominantly in stocks (87.75%) with a smaller exposure to bonds (12.11%). This allocation reflects a growth-oriented strategy, balancing between equity growth and bond stability. Compared to typical balanced portfolios, which might have a higher bond allocation, this portfolio leans more towards equities. This can be advantageous during bull markets but riskier during downturns. Consider adjusting the bond allocation upwards if you seek more stability or are nearing retirement to reduce exposure to equity market volatility.

Sectors Info

  • Technology
    24%
  • Financials
    14%
  • Health Care
    9%
  • Consumer Discretionary
    9%
  • Industrials
    8%
  • Telecommunications
    7%
  • Consumer Staples
    5%
  • Energy
    3%
  • Basic Materials
    3%
  • Utilities
    2%
  • Real Estate
    2%

Sector allocation is diversified, with a notable emphasis on technology (24.41%) and financial services (13.53%). This mirrors the general market trend but may lead to higher volatility, especially during tech sector corrections. The balance across other sectors like healthcare and consumer cyclical helps mitigate some risks. Diversification across sectors is crucial to reduce the impact of sector-specific downturns. Regularly reviewing sector exposure and rebalancing if necessary can help maintain a balanced risk profile, especially if certain sectors become overvalued or underperform.

Regions Info

  • North America
    66%
  • No data
    12%
  • Europe Developed
    10%
  • Japan
    4%
  • Asia Emerging
    3%
  • Asia Developed
    3%
  • Australasia
    1%
  • Africa/Middle East
    1%
  • Latin America
    1%

Geographically, the portfolio is heavily weighted towards North America (66%), with limited exposure to other regions. This aligns with many US-centric portfolios but may lack global diversification. The allocation to Europe Developed and Japan provides some international exposure, but emerging markets are underrepresented. This could limit growth potential from high-growth regions. To enhance diversification and capture global growth opportunities, consider gradually increasing exposure to emerging markets or other underrepresented regions, keeping in mind the potential for higher volatility.

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 balances risk and return by adjusting asset weights. This approach can identify the ideal mix of assets for the best possible risk-return ratio. While the current allocation is well-balanced, exploring minor adjustments in asset weights could further enhance performance. Keep in mind that optimization is based on historical data, and market conditions can change. Regularly reassessing the portfolio and making data-driven adjustments can help maintain an optimal balance.

Dividends Info

  • Fidelity 500 Index Fund 1.20%
  • FIDELITY U.S. BOND INDEX FUND INSTITUTIONAL PREMIUM CLASS 3.10%
  • Weighted yield (per year) 1.15%

The portfolio's overall dividend yield is 1.15%, with the Fidelity U.S. Bond Index Fund contributing a significant 3.1%. This yield provides a modest income stream, which can be beneficial for reinvestment or income needs. While dividend yields are not the primary focus of growth-oriented portfolios, they can offer a buffer during market downturns. If income is a priority, consider increasing exposure to dividend-focused funds or equities with strong dividend growth histories, balancing the need for income with growth potential.

Ongoing product costs Info

  • Fidelity 500 Index Fund 0.02%
  • FIDELITY U.S. BOND INDEX FUND INSTITUTIONAL PREMIUM CLASS 0.02%
  • Weighted costs total (per year) 0.02%

The total expense ratio (TER) of 0.02% is impressively low, thanks to the use of Fidelity's index funds. Low costs are a significant advantage, as they enhance net returns over the long term. This cost efficiency aligns well with best practices for portfolio management, ensuring more of your investment returns are retained. While the current costs are optimal, regularly reviewing fund expenses remains a good practice. If any costs rise unexpectedly, consider seeking lower-cost alternatives to maintain the portfolio's cost-effectiveness.

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