High concentration in US equities with a slight real estate exposure
Report created on Dec 31, 2024Risk profile
4/7
Diversification profile
2/5
Positions
-
VO Vanguard S&P 500 ETF
VOO - US9229083632 95.00% -
FS FIDELITY REAL ESTATE INDEX FUND INSTITUTIONAL CLASS
FSRNX 5.00%
This portfolio is heavily concentrated in a single ETF, the Vanguard S&P 500, which makes up 95% of the total holdings. The remaining 5% is allocated to the Fidelity Real Estate Index Fund. Such a high concentration in one ETF limits diversification, which can expose the portfolio to sector-specific risks. A more balanced portfolio typically includes a wider range of asset classes and funds to spread risk. Consider diversifying by including more asset classes like bonds or international equities to enhance resilience against market volatility.
Growth
Historically, the portfolio has delivered a strong Compound Annual Growth Rate (CAGR) of 13.72%, outperforming many benchmarks. However, it experienced a significant maximum drawdown of -34.35%, indicating potential vulnerability during market downturns. While past performance can provide insights, it doesn't guarantee future results. The impressive growth rate suggests a strong track record, but consider the potential for volatility. To mitigate this, diversifying into less correlated assets could help reduce drawdowns and stabilize returns.
Projection
The Monte Carlo simulation, a tool that uses historical data to project potential future outcomes, suggests a wide range of possible returns. With 1,000 simulations, the median outcome is a 238.26% return, while the worst-case scenario shows a -11.41% return. Although 933 simulations resulted in positive returns, it's important to note that these projections are based on past data and assumptions. Consider using these insights to evaluate your risk tolerance and whether the portfolio aligns with your long-term goals.
Asset classes
- Stocks 100%
The portfolio is overwhelmingly invested in stocks, with 99.9% allocated to equities and a negligible amount in cash. Such a concentration in a single asset class can lead to increased volatility during market swings. Diversification across different asset classes, such as bonds or commodities, can help stabilize returns and provide a buffer during downturns. By spreading investments across various asset types, you can achieve more consistent performance and potentially reduce overall risk.
Sectors
- Technology 31%
- Financials 12%
- Health Care 11%
- Consumer Discretionary 10%
- Telecommunications 9%
- Industrials 7%
- Real Estate 7%
- Consumer Staples 5%
- Energy 3%
- Utilities 3%
- Basic Materials 2%
The sector allocation is heavily skewed towards technology, which comprises over 31% of the portfolio. This concentration can lead to higher volatility, especially during periods of economic uncertainty or when interest rates rise. While technology has been a strong performer, consider balancing the portfolio by increasing exposure to underrepresented sectors like consumer defensive or utilities. This can provide more stability and reduce the impact of sector-specific downturns on overall performance.
Regions
- North America 99%
- Europe Developed 1%
The portfolio's geographic allocation is predominantly in North America, with 99.4% of assets concentrated there. This heavy reliance on a single region limits exposure to global growth opportunities and could increase vulnerability to regional economic downturns. To enhance diversification, consider including international equities from developed and emerging markets. This can provide exposure to different economic cycles and potentially improve risk-adjusted returns by spreading geographic risk.
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 is not optimized along the Efficient Frontier, which represents the best possible risk-return balance. By adjusting the allocation among existing assets, you can potentially achieve a more efficient portfolio. This doesn't necessarily mean adding new assets but rather reallocating within current holdings to improve the risk-return ratio. Regularly reviewing and rebalancing the portfolio can help maintain this optimal balance and enhance overall performance.
Dividends
- FIDELITY REAL ESTATE INDEX FUND INSTITUTIONAL CLASS 1.40%
- Vanguard S&P 500 ETF 1.20%
- Weighted yield (per year) 1.21%
The portfolio's overall dividend yield is 1.21%, with contributions from both the Vanguard S&P 500 ETF and the Fidelity Real Estate Index Fund. Dividends can provide a steady income stream and contribute to total returns, particularly in low-growth environments. However, the focus on growth-oriented sectors may limit dividend income. If income is a priority, consider increasing exposure to dividend-focused funds or sectors known for higher yields, such as utilities or consumer staples.
Ongoing product costs
- FIDELITY REAL ESTATE INDEX FUND INSTITUTIONAL CLASS 0.07%
- Vanguard S&P 500 ETF 0.03%
- Weighted costs total (per year) 0.03%
The portfolio's total expense ratio (TER) is impressively low at 0.03%, which is beneficial for long-term performance. Lower costs mean more of your investment returns are retained, rather than being eaten up by fees. This cost efficiency aligns well with best practices and supports better compounding over time. While the current cost structure is advantageous, continue to monitor for any fee changes and consider cost-effective alternatives if they arise.
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