A balanced portfolio with strong U.S. focus and low-cost diversified index funds

Report created on Mar 13, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

4/5
Broadly Diversified
Less diversification More diversification

Positions

The portfolio is composed of four funds: Fidelity 500 Index Fund (40%), American Funds Mortgage Fund (20%), Fidelity Small Cap Index Fund (20%), and Fidelity Total International Index Fund (20%). This mix offers broad diversification across large-cap U.S. equities, small-cap stocks, international markets, and mortgage-backed securities. Compared to benchmarks, this structure leans heavily on U.S. equities, which can offer stability and growth potential. Diversification is achieved by including international and small-cap stocks, which can help mitigate risks associated with single-market exposure.

Growth Info

Historically, the portfolio has delivered a strong CAGR of 9.58%, indicating solid growth over time. However, it also experienced a maximum drawdown of -24.78%, reflecting potential volatility during market downturns. Compared to benchmarks, this performance is commendable, aligning closely with broad market indices. It's important to note that past performance does not guarantee future results, but the historical trend suggests resilience and growth potential. Monitoring market conditions and adjusting allocations can help maintain this positive trajectory.

Projection Info

Forward projections using Monte Carlo simulations suggest a wide range of potential outcomes, with a 50th percentile end portfolio value of 174.3% and an annualized return of 8.40%. The simulations indicate a 94% likelihood of positive returns, though there's a 5% chance of a -6.0% return. Monte Carlo simulations use historical data to predict future performance, but they cannot account for unforeseen events. These projections provide a probabilistic view, aiding in understanding potential risks and returns. Regularly reviewing these projections can help align the portfolio with changing market conditions and personal goals.

Asset classes Info

  • Stocks
    80%

The portfolio is heavily weighted towards stocks, comprising 80% of the allocation, with no significant exposure to other asset classes like bonds or cash. This stock-heavy allocation aligns with a growth-oriented strategy, potentially offering higher returns but also increased volatility. Compared to benchmark allocations, this focus on equities is typical for a balanced portfolio aiming for growth. Introducing other asset classes, such as bonds, could enhance diversification and reduce risk, providing a more stable return profile over time.

Sectors Info

  • Technology
    19%
  • Financials
    13%
  • Health Care
    9%
  • Industrials
    9%
  • Consumer Discretionary
    9%
  • Telecommunications
    6%
  • Consumer Staples
    4%
  • Energy
    3%
  • Basic Materials
    3%
  • Real Estate
    3%
  • Utilities
    2%

Sector allocation is diverse, with technology (19%), financial services (13%), and healthcare (9%) leading the way. This distribution is well-aligned with benchmark norms, offering a balanced exposure to various economic sectors. Heavy technology exposure can lead to higher volatility, especially during interest rate changes. However, the inclusion of defensive sectors like consumer defensive (4%) and utilities (2%) provides some stability. Regularly reviewing sector trends and adjusting allocations can help optimize risk and return as market conditions evolve.

Regions Info

  • North America
    61%
  • Europe Developed
    8%
  • Japan
    3%
  • Asia Emerging
    3%
  • Asia Developed
    2%
  • Australasia
    1%
  • Africa/Middle East
    1%
  • Latin America
    1%

Geographic exposure is concentrated in North America (61%), with limited allocations to Europe Developed (8%), Japan (3%), and other regions. This U.S.-centric focus can benefit from the stability and growth of the U.S. market but may limit exposure to potential growth in emerging markets. Compared to benchmarks, this allocation is typical for U.S.-based investors seeking stability. Expanding international exposure, particularly in emerging markets, could enhance diversification and capture global growth opportunities.

Market capitalization Info

  • Mega-cap
    28%
  • Large-cap
    20%
  • Small-cap
    12%
  • Mid-cap
    11%
  • Micro-cap
    9%

The portfolio's market capitalization is diversified, with mega-cap stocks at 28%, big-cap at 20%, and small-cap at 12%. This distribution provides exposure to large, stable companies and smaller, potentially high-growth firms. Compared to benchmarks, this mix is balanced, offering both stability and growth potential. Small-cap stocks can add volatility but also offer higher growth prospects. Maintaining this balance can help achieve a favorable risk-return profile, but periodic reviews are essential to ensure alignment with market conditions.

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, a concept that identifies the best possible risk-return ratio for a given set of assets. This optimization focuses solely on current assets and their allocation, aiming to achieve the most efficient balance. While the current allocation is well-diversified, exploring alternative allocations could enhance returns or reduce risk. It's important to remember that efficiency does not guarantee diversification or other investment goals, but it can guide strategic adjustments for improved performance.

Dividends Info

  • American Funds Mortgage Fund Class 529-F-3 3.60%
  • FIDELITY SMALL CAP INDEX FUND INSTITUTIONAL PREMIUM CLASS 1.10%
  • Fidelity 500 Index Fund 1.30%
  • Weighted yield (per year) 1.46%

The portfolio's total dividend yield is 1.46%, with contributions from the American Funds Mortgage Fund (3.60%) and other index funds. Dividends can provide a steady income stream, enhancing overall returns, especially during periods of market volatility. For a balanced portfolio, dividends offer a cushion against market fluctuations, supporting a more stable return profile. While dividends are beneficial, they should not be the sole focus. Balancing growth and income through strategic allocations can optimize long-term performance.

Ongoing product costs Info

  • FIDELITY SMALL CAP INDEX FUND INSTITUTIONAL PREMIUM CLASS 0.02%
  • FIDELITY TOTAL INTERNATIONAL INDEX FUND INSTITUTIONAL PREMIUM CLASS 0.06%
  • Fidelity 500 Index Fund 0.02%
  • Weighted costs total (per year) 0.02%

The portfolio's total expense ratio (TER) is impressively low at 0.02%, primarily due to the low-cost index funds. Minimizing costs is crucial for enhancing long-term returns, as high fees can erode gains over time. Compared to industry averages, this TER is highly competitive, supporting better performance. Maintaining this cost efficiency is essential, but it's also important to periodically review fund expenses to ensure they remain aligned with investment goals and market standards.

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