A concentrated portfolio with a strong focus on US equities and minimal diversification

Report created on Jan 2, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

The portfolio is heavily concentrated, with the Fidelity 500 Index Fund comprising 87.41% of the total allocation. This means most investments are tied to the performance of large-cap US stocks. The remaining assets are split between the Schwab U.S. Dividend Equity ETF and the Invesco NASDAQ 100 ETF, each holding around 6.3%. Compared to typical balanced portfolios, which often include bonds and international equities, this portfolio lacks diversification. Diversifying across more asset classes could help mitigate risks associated with market volatility and economic downturns.

Growth Info

Historically, the portfolio has performed well, achieving a Compound Annual Growth Rate (CAGR) of 15.05%. This growth is impressive, especially when compared to broader market benchmarks. However, the portfolio also experienced a significant maximum drawdown of -24.5%, indicating vulnerability during market downturns. While past performance is promising, it's essential to remember that it does not guarantee future success. Investors should prepare for potential volatility by considering a more diversified asset allocation to reduce downside risks.

Projection Info

The Monte Carlo simulation, which uses historical data to forecast future outcomes, suggests a wide range of potential returns for this portfolio. With 1,000 simulations, the 50th percentile shows a potential growth of 565.88%, but the 5th percentile indicates a much lower return of 117.45%. While the annualized return across simulations is 15.82%, it's crucial to note that these projections are based on past data and may not predict future performance accurately. Investors should use these simulations as a guide but remain cautious and adaptable to changing market conditions.

Asset classes Info

  • Stocks
    100%

This portfolio is predominantly invested in stocks, making up nearly 100% of the asset allocation. Such a heavy concentration in equities can lead to significant growth during bullish market conditions but also exposes the portfolio to higher risks during downturns. In contrast, balanced portfolios typically include bonds or other fixed-income assets to provide stability. Incorporating a mix of asset classes, such as bonds or real estate, could help reduce volatility and provide a steadier income stream, especially during market fluctuations.

Sectors Info

  • Technology
    33%
  • Financials
    13%
  • Health Care
    11%
  • Telecommunications
    9%
  • Consumer Discretionary
    9%
  • Industrials
    8%
  • Consumer Staples
    6%
  • Energy
    4%
  • Utilities
    2%
  • Real Estate
    2%
  • Basic Materials
    2%
  • Consumer Discretionary
    2%

The sector allocation is heavily weighted towards technology, which accounts for 32.72% of the portfolio. This concentration can lead to higher volatility, especially if the tech sector faces challenges like regulatory changes or interest rate hikes. Other sectors, such as financial services and healthcare, are also significant but less dominant. While sector diversity is present, the portfolio could benefit from a more balanced approach, reducing reliance on any single sector. This balance can help cushion the impact of sector-specific downturns and enhance overall stability.

Regions Info

  • North America
    99%
  • Europe Developed
    1%

Geographically, the portfolio is almost entirely focused on North America, with 99.28% of assets allocated there. This heavy concentration limits exposure to international markets, which can offer growth opportunities and diversification benefits. By expanding geographic exposure, investors can mitigate risks associated with regional economic downturns or political instability. A more global approach could involve increasing allocations to developed and emerging markets, which may provide access to different economic cycles and growth prospects.

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 current asset allocation could be optimized using the Efficient Frontier, which aims to achieve the best possible risk-return ratio. This approach involves adjusting the weights of existing assets to maximize returns for a given level of risk. While the portfolio is already cost-effective, exploring optimization strategies could further enhance performance. However, it's essential to consider that optimization based solely on current assets may not address diversification needs or other investment goals like income generation or capital preservation.

Dividends Info

  • Fidelity 500 Index Fund 1.20%
  • Invesco NASDAQ 100 ETF 0.60%
  • Schwab U.S. Dividend Equity ETF 3.60%
  • Weighted yield (per year) 1.31%

The portfolio's dividend yield is relatively low at 1.31%, with the Schwab U.S. Dividend Equity ETF contributing the highest yield of 3.6%. Dividends can provide a steady income stream, which is especially valuable during periods of market volatility. For investors seeking income, increasing exposure to high-dividend assets could enhance cash flow and provide additional stability. However, it's important to balance dividend yield with growth potential, ensuring the portfolio remains aligned with long-term investment goals.

Ongoing product costs Info

  • Fidelity 500 Index Fund 0.02%
  • Invesco NASDAQ 100 ETF 0.15%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • Weighted costs total (per year) 0.03%

The portfolio benefits from impressively low costs, with a total expense ratio (TER) of just 0.03%. This low cost structure supports better long-term performance by minimizing the drag on returns. Compared to many actively managed funds, which often have higher fees, this portfolio's cost efficiency is a significant advantage. Maintaining low costs should remain a priority, as it allows more of the portfolio's gains to compound over time, enhancing overall wealth accumulation.

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