Aggressive portfolio with high concentration in tech and limited geographic diversification
Report created on Jan 16, 2025Risk profile
6/7
Diversification profile
2/5
Positions
-
FX Fidelity 500 Index Fund
FXAIX - US3159117502 40.00% -
PL Palantir Technologies Inc
PLTR - US69608A1088 40.00% -
AR Ares Capital Corporation
ARCC - US04010L1035 10.00% -
KM Kinder Morgan Inc
KMI - US49456B1017 10.00%
The portfolio is heavily weighted in the Fidelity 500 Index Fund and Palantir Technologies Inc., each comprising 40% of the total. This composition leans towards large-cap U.S. equities with a significant individual stock exposure, which is higher than typical diversified portfolios that often include bonds or international stocks. While the fund provides broad market exposure, the concentration in a single stock increases risk. Diversifying into more asset classes can mitigate potential volatility and improve balance.
Growth
The portfolio has shown impressive historical performance with a CAGR of 40.07%, indicating strong growth. However, the high max drawdown of -55.08% suggests significant volatility. This performance surpasses many benchmarks, reflecting the aggressive nature of the investment. While past performance is not indicative of future results, understanding these trends can help set realistic expectations. Consider balancing high-growth assets with more stable options to reduce potential drawdowns.
Projection
The Monte Carlo simulation projects a wide range of potential outcomes, with a median return of 4,446.12% and a high likelihood of positive returns. This method uses historical data to simulate future performance scenarios, offering a glimpse into potential risks and rewards. However, it's important to note that these projections are not guarantees. To improve confidence in future outcomes, consider periodically reviewing asset allocation and market conditions to ensure alignment with investment goals.
Asset classes
- Stocks 100%
The portfolio is overwhelmingly invested in stocks, with negligible cash holdings. This single asset class focus can amplify returns but also increases risk, especially during market downturns. Typically, a more diversified portfolio includes bonds or alternative investments to cushion against volatility. To enhance diversification, consider integrating different asset classes, which can provide stability and potentially improve the risk-return profile.
Sectors
- Technology 53%
- Financials 15%
- Energy 11%
- Consumer Discretionary 4%
- Health Care 4%
- Telecommunications 4%
- Industrials 3%
- Consumer Staples 2%
- Utilities 1%
- Real Estate 1%
- Basic Materials 1%
With over half of the portfolio in technology, it is heavily sector-concentrated, which can lead to higher volatility, especially if the tech sector faces downturns. The remaining allocation spans financial services, energy, and other sectors, but these are underrepresented compared to benchmarks. Broadening sector exposure can mitigate risks associated with sector-specific downturns and enhance overall stability. Consider gradually increasing exposure to underrepresented sectors to achieve a more balanced distribution.
Regions
- North America 100%
The portfolio is predominantly concentrated in North America, with minimal exposure to Europe and Asia. This geographic limitation can increase vulnerability to regional economic downturns. Diversifying geographically can help mitigate risks and capture growth opportunities in different markets. Consider adding international equities to improve geographic balance and reduce reliance on North American markets.
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's risk-return profile can be optimized using the Efficient Frontier, which identifies the best possible risk-return ratio based on current assets. This optimization doesn't necessarily mean adding more assets but reallocating within the existing ones for improved efficiency. By adjusting allocations, you can potentially achieve better returns for the same level of risk, aligning with your aggressive investment strategy.
Dividends
- Ares Capital Corporation 8.50%
- Fidelity 500 Index Fund 1.20%
- Kinder Morgan Inc 3.90%
- Weighted yield (per year) 1.72%
The portfolio's dividend yield is 1.72%, supported by Ares Capital Corporation's 8.5% yield. Dividends provide a steady income stream and can be particularly beneficial during market volatility. While the current yield is moderate, reinvesting dividends can enhance long-term growth. Consider balancing high-yield stocks with growth-oriented investments to maintain income while pursuing capital appreciation.
Ongoing product costs
- Fidelity 500 Index Fund 0.02%
- Weighted costs total (per year) 0.01%
The portfolio's costs are impressively low, with the Fidelity 500 Index Fund's TER at just 0.02%. Low costs contribute positively to long-term performance, as they reduce the drag on returns. Maintaining a focus on cost-efficient investments can enhance net returns over time. Regularly reviewing and optimizing for lower-cost alternatives can further improve the portfolio's efficiency.
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