A growth-focused portfolio with high tech concentration and moderate geographic diversification

Report created on Jan 19, 2025

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

This portfolio is heavily concentrated in technology, with Microsoft alone comprising 26.5% of the total. The remaining assets are primarily in U.S.-based funds, including the Fidelity 500 Index Fund and various sector-specific funds. This composition suggests a strong focus on growth, particularly through technology and large-cap stocks. Compared to a typical benchmark, such as the S&P 500, this portfolio has a higher concentration in individual stocks and sectors, increasing potential volatility. Consider diversifying further into other sectors or regions to mitigate risk and enhance stability.

Growth Info

Historically, the portfolio has delivered impressive returns with a Compound Annual Growth Rate (CAGR) of 19.61%. However, it also experienced a significant maximum drawdown of 34.22%, indicating its vulnerability during market downturns. This performance outpaces typical benchmarks, reflecting the growth-focused, tech-heavy nature of the holdings. While past performance is no guarantee of future results, the high returns suggest potential for continued growth. To manage risk, consider implementing strategies to protect against significant drawdowns, such as diversification or stop-loss orders.

Projection Info

The Monte Carlo simulation, which uses historical data to predict future outcomes, suggests a wide range of potential returns. With 1,000 simulations, the median projection is a 688.25% return, indicating strong growth potential. However, the 5th percentile projects a 69.22% return, highlighting possible downside risks. While simulations provide valuable insights, they rely on historical data and assumptions, which may not reflect future market conditions. To prepare for various scenarios, consider stress-testing the portfolio under different market conditions and adjusting allocations accordingly.

Asset classes Info

  • Stocks
    99%

The portfolio is overwhelmingly invested in stocks, with 99.18% allocated to equities. This concentration limits exposure to other asset classes such as bonds or cash, which could provide stability during market fluctuations. Compared to a balanced portfolio, which typically includes a mix of stocks, bonds, and other assets, this allocation increases potential returns but also heightens risk. To enhance diversification, consider incorporating a broader range of asset classes, which can help cushion against volatility and provide more consistent returns over time.

Sectors Info

  • Technology
    63%
  • Health Care
    12%
  • Financials
    12%
  • Consumer Discretionary
    4%
  • Telecommunications
    3%
  • Industrials
    2%
  • Consumer Staples
    1%
  • Energy
    1%
  • Utilities
    1%
  • Real Estate
    1%

With 62.66% of the portfolio in technology, there is a notable sector concentration that can lead to higher volatility, especially during periods of tech market instability. Other sectors like healthcare and financial services are underrepresented compared to benchmarks like the S&P 500. This imbalance may limit the portfolio's ability to benefit from sector rotations. To reduce sector-specific risks, consider reallocating some assets to underweighted sectors, which could also capitalize on potential growth opportunities in those areas.

Regions Info

  • North America
    91%
  • Europe Developed
    7%
  • Asia Developed
    1%

The portfolio's geographic exposure is predominantly in North America, accounting for 90.86% of the allocation. This heavy regional focus may limit exposure to growth opportunities in other parts of the world, such as emerging markets. Compared to a global benchmark, this portfolio lacks international diversification, which can mitigate regional economic risks. To enhance geographic diversification, consider increasing allocations to international markets, which may also provide a hedge against domestic economic downturns. [nux-report-marketcap] The portfolio's market capitalization is skewed towards large-cap stocks, such as Microsoft and funds focusing on large-cap growth. This focus can provide stability and consistent returns but may miss out on higher growth potential from small- or mid-cap companies. Compared to a more balanced market cap allocation, this portfolio might not fully capture the benefits of different market segments. Consider diversifying into smaller-cap stocks to potentially enhance returns and reduce reliance on large-cap performance.

Redundant positions Info

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

The portfolio includes highly correlated assets, particularly among the large-cap growth and index funds. High correlation means these assets tend to move together, which can limit diversification benefits during market downturns. While similar assets can reinforce performance during uptrends, they increase the risk of simultaneous losses. To improve diversification, consider reducing exposure to redundant holdings and incorporating assets with lower correlation, which can provide better risk management and more stable returns.

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 potentially be optimized using the Efficient Frontier, which seeks the best possible risk-return ratio by adjusting asset allocations. However, the current high correlation among certain assets limits diversification benefits. Before optimization, focus on reducing overlap and enhancing diversification across sectors and geographies. By doing so, the portfolio can achieve a more efficient balance, improving returns relative to risk. Remember, optimization is based on current holdings, not introducing new assets.

Dividends Info

  • FIDELITY BLUE CHIP GROWTH FUND FIDELITY BLUE CHIP GROWTH FUND 0.20%
  • PHARMACEUTICALS PORTFOLIO PHARMACEUTICALS PORTFOLIO 0.20%
  • INSURANCE PORTFOLIO INSURANCE PORTFOLIO 0.10%
  • FIDELITY LARGE CAP GROWTH INDEX FUND INSTITUTIONAL PREMIUM CLASS 0.40%
  • Fidelity 500 Index Fund 1.20%
  • Microsoft Corporation 0.70%
  • Weighted yield (per year) 0.49%

The portfolio's overall dividend yield is modest at 0.49%, reflecting its growth-oriented focus. While dividends can provide a steady income stream, this portfolio prioritizes capital appreciation over income generation. Compared to income-focused portfolios, this allocation may not suit investors seeking regular cash flow. If income is a priority, consider integrating higher-yielding assets or dividend-focused funds, which can enhance cash flow without sacrificing growth potential.

Ongoing product costs Info

  • FIDELITY BLUE CHIP GROWTH FUND FIDELITY BLUE CHIP GROWTH FUND 0.47%
  • PHARMACEUTICALS PORTFOLIO PHARMACEUTICALS PORTFOLIO 0.70%
  • Fidelity Select Semiconductors Portfolio 0.65%
  • INSURANCE PORTFOLIO INSURANCE PORTFOLIO 0.73%
  • FIDELITY LARGE CAP GROWTH INDEX FUND INSTITUTIONAL PREMIUM CLASS 0.04%
  • TECHNOLOGY PORTFOLIO TECHNOLOGY PORTFOLIO 0.64%
  • Fidelity 500 Index Fund 0.02%
  • Weighted costs total (per year) 0.31%

The portfolio's total expense ratio (TER) is 0.31%, which is relatively low and supports better long-term performance by minimizing costs. The Fidelity 500 Index Fund contributes to this efficiency with a minimal 0.02% cost. Keeping expenses down is crucial, as high fees can erode returns over time. This cost structure aligns well with best practices, ensuring more of your money is working for you. Continue monitoring expenses and consider cost-effective alternatives if any fund fees increase.

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