A tech-focused portfolio with strong growth potential but high correlation among assets

Report created on Jan 18, 2025

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

The portfolio is heavily concentrated in technology-focused funds, comprising over 66% of the total allocation. With most assets being equity funds, the portfolio leans heavily towards growth-oriented investments. Compared to a typical balanced portfolio, this composition signals a higher risk due to limited diversification across asset classes. While this aligns with a growth strategy, it may expose the portfolio to significant volatility. Diversifying into other asset classes like bonds or real estate could help reduce risk and smooth out returns.

Growth Info

Historically, the portfolio has performed impressively with a CAGR of 16.67%, indicating strong growth over time. However, it has also experienced a maximum drawdown of -40.44%, highlighting its vulnerability during market downturns. This performance suggests that while the portfolio can yield high returns, it comes with significant risk. Investors should be prepared for potential fluctuations and consider strategies to mitigate drawdowns, such as incorporating more stable assets or hedging techniques.

Projection Info

The Monte Carlo simulation, which uses historical data to project potential future outcomes, suggests a wide range of possibilities for this portfolio. The median, or 50th percentile, indicates a potential return of 556.87%, but the 5th percentile shows a much lower return of 57.33%. While simulations provide useful insights, they rely on past data and cannot predict future results with certainty. Investors should view these projections as one of many tools to assess potential risks and returns, rather than definitive forecasts.

Asset classes Info

  • Stocks
    99%
  • Other
    1%

The portfolio is overwhelmingly allocated to stocks, comprising nearly 99% of the total assets. This heavy equity focus can drive significant growth, but it also increases exposure to market volatility. Compared to a more diversified benchmark, this allocation lacks balance. Introducing other asset classes like bonds or commodities could enhance stability and reduce risk, especially during economic downturns when equities might underperform. A more diversified mix can help achieve a smoother return profile over time.

Sectors Info

  • Technology
    66%
  • Consumer Discretionary
    9%
  • Telecommunications
    8%
  • Health Care
    5%
  • Financials
    4%
  • Industrials
    3%
  • Consumer Staples
    2%
  • Energy
    1%
  • Utilities
    1%
  • Basic Materials
    1%
  • Real Estate
    1%

The portfolio is notably concentrated in the technology sector, which accounts for over two-thirds of its allocation. While this concentration can drive growth during tech booms, it also subjects the portfolio to sector-specific risks, such as regulatory changes or tech market corrections. A more balanced sector allocation could mitigate these risks and provide steadier returns. Considering additional exposure to sectors like healthcare or industrials might enhance diversification and reduce reliance on the tech sector's performance.

Regions Info

  • North America
    92%
  • Europe Developed
    4%
  • Asia Developed
    3%
  • Asia Emerging
    1%

Geographically, the portfolio is predominantly focused on North America, with over 92% of its assets allocated there. This concentration may limit exposure to growth opportunities in other regions. By diversifying into emerging markets or other developed regions, the portfolio could benefit from a broader range of economic cycles and reduce geographic risk. Aligning geographic exposure with global benchmarks can enhance diversification and potentially improve risk-adjusted returns.

Redundant positions Info

  • FIDELITY NASDAQ COMPOSITE INDEX FUND FIDELITY NASDAQ COMPOSITE INDEX FUND
    FIDELITY BLUE CHIP GROWTH FUND FIDELITY BLUE CHIP GROWTH FUND
    High correlation
  • Vanguard S&P 500 ETF
    Fidelity 500 Index Fund
    High correlation

The portfolio has significant correlations among its assets, particularly between the Fidelity Nasdaq Composite Index Fund and the Fidelity Blue Chip Growth Fund, as well as the Vanguard S&P 500 ETF and the Fidelity 500 Index Fund. High correlation means these assets tend to move together, reducing diversification benefits. To enhance diversification, consider replacing some of these overlapping assets with those that have lower correlation, which can help manage risk during market downturns.

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 seeks the best possible risk-return ratio. However, before optimizing, addressing the high correlation among assets is crucial, as it limits diversification benefits. By reallocating funds to less correlated assets, the portfolio can achieve a more efficient risk-return balance. This approach focuses on enhancing returns for a given level of risk, rather than merely diversifying for its own sake.

Dividends Info

  • FIDELITY BLUE CHIP GROWTH FUND FIDELITY BLUE CHIP GROWTH FUND 0.20%
  • FIDELITY NASDAQ COMPOSITE INDEX FUND FIDELITY NASDAQ COMPOSITE INDEX FUND 0.60%
  • Fidelity 500 Index Fund 1.20%
  • Vanguard S&P 500 ETF 1.20%
  • Weighted yield (per year) 0.34%

The portfolio's dividend yield is relatively low at 0.34%, reflecting its growth-focused strategy. While dividends can provide a steady income stream, this portfolio prioritizes capital appreciation over income generation. Investors seeking higher income might consider adding dividend-focused funds or stocks. However, for those focused on growth, the current yield may be acceptable, provided the portfolio's capital gains continue to meet long-term objectives.

Ongoing product costs Info

  • FIDELITY BLUE CHIP GROWTH FUND FIDELITY BLUE CHIP GROWTH FUND 0.47%
  • FIDELITY GROWTH DISCOVERY FUND FIDELITY GROWTH DISCOVERY FUND 0.66%
  • FIDELITY NASDAQ COMPOSITE INDEX FUND FIDELITY NASDAQ COMPOSITE INDEX FUND 0.29%
  • Fidelity Select Semiconductors Portfolio 0.65%
  • TECHNOLOGY PORTFOLIO TECHNOLOGY PORTFOLIO 0.64%
  • Fidelity 500 Index Fund 0.02%
  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.45%

The portfolio's total expense ratio (TER) is 0.45%, which is relatively low and supports better long-term performance by minimizing costs. This efficient cost structure is beneficial, as high fees can erode returns over time. Investors should continue monitoring fund fees and consider lower-cost alternatives if available. Maintaining a focus on cost efficiency will help maximize net returns and contribute positively to the portfolio's overall performance.

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