A balanced portfolio with strong U.S. focus and moderate tech concentration

Report created on Jan 23, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

This portfolio is mainly composed of U.S. equity index funds and ETFs, with a significant 40% allocation to the Fidelity 500 Index Fund. It also includes a 33% stake in the Fidelity Total Market Index Fund and an 11.5% position in the Invesco NASDAQ 100 ETF. The portfolio is rounded out with a small allocation to international equities and gold. Compared to a typical balanced benchmark, this portfolio leans heavily towards U.S. equities, offering limited exposure to other asset classes. To enhance diversification, consider adding alternative asset classes like bonds or real estate to balance risk and return.

Growth Info

Historically, the portfolio has delivered a strong CAGR of 15.07%, outperforming many benchmarks. However, it experienced a maximum drawdown of -25.86%, indicating susceptibility to market downturns. The concentration in U.S. equities, particularly in tech, has likely contributed to both the high returns and volatility. While past performance is not indicative of future results, understanding these trends can help manage expectations. To mitigate potential drawdowns, consider diversifying across more asset classes or regions.

Projection Info

Monte Carlo simulations project a wide range of potential outcomes, with a 50th percentile return of 436.2% over the investment horizon. This analysis uses historical data to estimate future performance, but it's important to remember that past trends don't guarantee future results. The simulations suggest a high likelihood of positive returns, but the range of outcomes reflects inherent market uncertainties. To better prepare for future scenarios, consider stress-testing the portfolio against various economic conditions.

Asset classes Info

  • Stocks
    97%
  • Other
    3%

The portfolio is heavily weighted towards stocks, with 97% allocated to equities and a minimal 3% in other assets like gold. This allocation provides significant growth potential but also increases exposure to market volatility. Compared to a balanced benchmark, the lack of bonds or cash reduces defensive positioning. To improve risk management, consider incorporating fixed-income securities, which can provide stability and income during market downturns.

Sectors Info

  • Technology
    33%
  • Financials
    12%
  • Health Care
    10%
  • Consumer Discretionary
    9%
  • Telecommunications
    9%
  • Industrials
    8%
  • Consumer Staples
    5%
  • Energy
    3%
  • Utilities
    2%
  • Real Estate
    2%
  • Basic Materials
    2%
  • Consumer Discretionary
    2%

Sector-wise, the portfolio has a notable 33% allocation to technology, followed by financial services and healthcare. This tech-heavy concentration may lead to higher volatility, especially during interest rate hikes or market corrections. While tech has been a strong growth driver, diversifying into other sectors could reduce sector-specific risks. Aligning sector allocations with broader market benchmarks may enhance resilience against sector downturns.

Regions Info

  • North America
    92%
  • Europe Developed
    3%
  • Asia Emerging
    1%
  • Japan
    1%
  • Asia Developed
    1%

Geographically, the portfolio is concentrated in North America, with 92% exposure. This focus limits diversification benefits from international markets, which can offer unique growth opportunities and risk mitigation. By incorporating more global equities, particularly from emerging markets, the portfolio could better balance regional risks and capture diverse economic cycles. A more geographically diverse allocation aligns with global benchmarks and enhances long-term growth potential.

Market capitalization Info

  • Mega-cap
    44%
  • Large-cap
    32%
  • Mid-cap
    17%
  • Small-cap
    3%
  • No data
    3%
  • Micro-cap
    1%

The portfolio is skewed towards large-cap stocks, with 44% in mega caps and 32% in big caps. This focus on large companies provides stability and lower volatility but may limit exposure to the high growth potential of smaller companies. Incorporating more mid and small-cap stocks could enhance growth prospects and diversification. Balancing market cap exposure with benchmark norms can improve risk-adjusted returns.

Redundant positions Info

  • FIDELITY ZERO TOTAL MARKET INDEX FUND
    Fidelity Total Market Index Fund
    Fidelity 500 Index Fund
    High correlation

The portfolio shows high correlation among some U.S. equity funds, particularly the Fidelity 500 Index Fund, Fidelity Total Market Index Fund, and FIDELITY ZERO TOTAL MARKET INDEX FUND. High correlation means these assets tend to move together, reducing diversification benefits. During market downturns, this could amplify losses. To enhance diversification, consider reducing overlapping positions and adding assets with lower correlation to U.S. equities.

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 be optimized using the Efficient Frontier, focusing on maximizing the risk-return ratio. By adjusting allocations among existing assets, it may achieve a more efficient balance between risk and return. However, optimization should consider diversification goals and investor preferences. The current asset mix offers a solid foundation, but exploring alternative allocations could enhance efficiency without compromising diversification.

Dividends Info

  • Fidelity Total Market Index Fund 0.20%
  • Fidelity 500 Index Fund 1.20%
  • FIDELITY ZERO TOTAL MARKET INDEX FUND 1.10%
  • Invesco NASDAQ 100 ETF 0.60%
  • Weighted yield (per year) 0.70%

The portfolio's dividend yield stands at 0.70%, with the Fidelity 500 Index Fund contributing a significant portion. While dividends provide a steady income stream, the yield is relatively low compared to income-focused portfolios. For investors seeking higher income, adding dividend-paying stocks or funds could enhance cash flow. Balancing growth and income aligns with the portfolio's balanced risk profile and supports long-term financial goals.

Ongoing product costs Info

  • FIDELITY GLOBAL EX U.S. INDEX FUND INSTITUTIONAL PREMIUM CLASS 0.06%
  • Fidelity Total Market Index Fund 0.02%
  • Fidelity 500 Index Fund 0.02%
  • SPDR® Gold Shares 0.40%
  • Invesco NASDAQ 100 ETF 0.15%
  • Weighted costs total (per year) 0.04%

The portfolio's costs are impressively low, with a Total Expense Ratio (TER) of 0.04%. This cost efficiency supports better long-term performance by minimizing fee-related drag on returns. The SPDR® Gold Shares has the highest cost at 0.40%, which is still reasonable given its role in diversification. Maintaining low costs is crucial for maximizing net returns, so continue prioritizing low-cost funds and ETFs in future allocations.

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