A tech-heavy balanced portfolio with a focus on U.S. equities and moderate risk

Report created on Dec 27, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

This portfolio consists of four primary holdings: Fidelity 500 Index Fund (35%), Invesco NASDAQ 100 ETF (35%), Schwab U.S. Dividend Equity ETF (20%), and Fidelity MSCI Information Technology Index ETF (10%). The portfolio is heavily weighted towards U.S. equities, with a significant emphasis on large-cap stocks. Compared to a typical balanced portfolio, this one leans more towards growth-oriented investments, with limited diversity across asset classes. To enhance diversification, consider incorporating additional asset classes such as bonds or international equities, which can provide balance and reduce overall risk.

Growth Info

Historically, this portfolio has delivered impressive returns, with a Compound Annual Growth Rate (CAGR) of 16.11%. However, it has also experienced a maximum drawdown of -26.9%, indicating significant volatility. When compared to market benchmarks, this performance suggests a strong growth trajectory but with higher risk exposure. It's essential to remember that past performance does not guarantee future results. To mitigate potential downturns, consider strategies like rebalancing or incorporating defensive assets to cushion against market volatility.

Projection Info

The forward projection using Monte Carlo simulation shows promising potential outcomes, with an annualized return of 17.63% across 1,000 simulations. While 996 out of these simulations indicate positive returns, it's crucial to note that these projections rely on historical data and assumptions, which may not hold in the future. The 5th percentile outcome suggests a 137% return, while the median is 688.54%. To prepare for various scenarios, consider stress-testing the portfolio against different market conditions and adjusting asset allocations accordingly.

Asset classes Info

  • Stocks
    100%

This portfolio is predominantly composed of stocks, making up 99.77% of the total allocation. Such a concentration in a single asset class limits diversification and increases exposure to market volatility. A more diversified portfolio typically includes a mix of stocks, bonds, and other asset classes. To improve diversification, consider adding fixed-income securities or alternative investments, which can provide stability and reduce risk during market downturns. Balancing asset classes can enhance the portfolio's resilience and long-term performance.

Sectors Info

  • Technology
    41%
  • Telecommunications
    10%
  • Financials
    9%
  • Health Care
    9%
  • Consumer Discretionary
    8%
  • Consumer Staples
    7%
  • Industrials
    6%
  • Energy
    4%
  • Consumer Discretionary
    4%
  • Basic Materials
    1%
  • Utilities
    1%
  • Real Estate
    1%

The portfolio is heavily concentrated in the technology sector, accounting for 41.39% of the allocation. Other sectors like communication services, financial services, and healthcare have smaller representations. This sectoral concentration can lead to higher volatility, especially during periods of technological market shifts or regulatory changes. To mitigate sector-specific risks, consider diversifying into underrepresented sectors such as utilities or real estate. This can help balance the portfolio and provide more consistent returns across different economic cycles.

Regions Info

  • North America
    99%
  • Europe Developed
    1%

Geographically, the portfolio is overwhelmingly focused on North America, with 98.78% of assets allocated there. This lack of international exposure limits the benefits of geographic diversification, which can help mitigate regional economic risks. By incorporating assets from Europe, Asia, or emerging markets, the portfolio can achieve greater diversification and potentially capture growth opportunities in other regions. Consider gradually increasing exposure to international equities to enhance the portfolio's global reach and reduce dependency on the U.S. market.

Redundant positions Info

  • Fidelity® MSCI Information Technology Index ETF
    Invesco NASDAQ 100 ETF
    High correlation

The portfolio contains highly correlated assets, particularly between the Fidelity MSCI Information Technology Index ETF and the Invesco NASDAQ 100 ETF. High correlation means these assets tend to move in the same direction, reducing diversification benefits. During market downturns, this can lead to amplified losses. To enhance diversification, consider replacing one of these highly correlated assets with an investment that has a lower correlation. This could help balance the portfolio and improve its resilience to market fluctuations.

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 current asset allocation can be optimized using the Efficient Frontier, which aims to achieve the best possible risk-return ratio. By adjusting the weights of existing assets, the portfolio could potentially enhance returns for the same level of risk or reduce risk for the same level of returns. It's important to note that this optimization focuses on reallocating current assets rather than introducing new ones. Regularly reassessing the portfolio's efficiency can help ensure it remains aligned with investment goals and market conditions.

Dividends Info

  • Fidelity® MSCI Information Technology Index ETF 0.40%
  • Fidelity 500 Index Fund 1.20%
  • Invesco NASDAQ 100 ETF 0.60%
  • Schwab U.S. Dividend Equity ETF 3.60%
  • Weighted yield (per year) 1.39%

The portfolio's dividend yield stands at 1.39%, with the Schwab U.S. Dividend Equity ETF contributing the highest yield at 3.6%. Dividends can provide a steady income stream and help cushion against market volatility. For investors seeking income, focusing on high-dividend stocks or funds may be beneficial. However, it's crucial to balance yield with growth potential. Ensuring a mix of dividend-paying and growth-oriented investments can help achieve both income and capital appreciation goals.

Ongoing product costs Info

  • Fidelity® MSCI Information Technology Index ETF 0.08%
  • 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) 0.08%

The portfolio's total expense ratio (TER) is impressively low at 0.08%, indicating cost efficiency. Lower costs can significantly enhance long-term returns by reducing the drag on performance. This aligns well with best practices, as minimizing fees is crucial for maximizing net returns. To maintain this advantage, regularly review the portfolio for any changes in expense ratios and explore opportunities to replace high-cost assets with more cost-effective alternatives without sacrificing performance or diversification.

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