Growth-oriented portfolio with high concentration in US equities and low diversification
Report created on Sep 30, 2025Risk profile
5/7
Diversification profile
2/5
Positions
-
FX Fidelity 500 Index Fund
FXAIX - US3159117502 89.07% -
FS Fidelity Total Market Index Fund
FSKAX - US3159116934 7.77% -
QQ Invesco QQQ Trust
QQQ - US46090E1038 3.16%
The portfolio is heavily weighted towards US equities, with a significant majority allocated to the Fidelity 500 Index Fund. This is complemented by investments in the Fidelity Total Market Index Fund and the Invesco QQQ Trust, both of which also focus on US stocks. The heavy concentration in just a few funds, particularly those tracking similar indices, indicates a low level of diversification across asset classes and geographies. This composition suggests a strategy focused on capturing the broad movements of the US stock market.
Growth
Historically, the portfolio has shown impressive growth, with a Compound Annual Growth Rate (CAGR) of 15.71%. However, it's important to note that past performance is not indicative of future results. The maximum drawdown of -33.62% underscores the potential volatility and risk associated with a high concentration in equities. These figures highlight the growth potential of the portfolio but also underline the importance of being prepared for significant market fluctuations.
Projection
Using Monte Carlo simulations, which forecast potential outcomes based on historical data, the portfolio's future performance varies widely, with a median projection of 842.8% growth. While simulations can provide a range of possible outcomes, they are inherently uncertain and should be viewed as one of many tools in making informed investment decisions. This projection underscores the portfolio's growth potential while highlighting the risk of significant variability in returns.
Asset classes
- Stocks 100%
The portfolio is entirely allocated to stocks, with no exposure to other asset classes such as bonds or real estate. This singular focus on equities enhances growth potential but also increases risk, especially during market downturns. Diversifying across different asset classes can help mitigate this risk by spreading exposure across investments that may react differently to the same economic events.
Sectors
- Technology 33%
- Financials 14%
- Consumer Discretionary 10%
- Telecommunications 10%
- Health Care 9%
- Industrials 8%
- Consumer Staples 6%
- Energy 3%
- Utilities 2%
- Real Estate 2%
- Basic Materials 2%
The sector allocation is heavily skewed towards technology, financial services, and consumer cyclicals, which are sectors known for their growth potential but also for their volatility. This concentration can lead to higher gains during bullish market phases but can also expose the portfolio to significant losses during corrections, especially in the tech sector. Balancing sector exposure can help stabilize returns over time.
Regions
- North America 99%
With 99% of assets allocated to North America, the portfolio lacks international diversification. This geographic concentration in developed markets, particularly the US, can limit exposure to growth opportunities in emerging markets and increase vulnerability to region-specific economic downturns. Incorporating a broader geographic distribution could enhance returns and reduce risk over the long term.
Market capitalization
- Mega-cap 46%
- Large-cap 34%
- Mid-cap 18%
- Small-cap 1%
The focus on mega and big-cap stocks, which constitute 80% of the portfolio, aligns with the portfolio's growth and stability objectives. These companies are typically less volatile than smaller caps. However, the minimal exposure to medium, small, and micro-cap stocks may limit potential for outsized gains that these smaller companies can offer, albeit with higher risk.
Redundant positions
-
High correlationFidelity Total Market Index FundFidelity 500 Index Fund
The high correlation between the Fidelity 500 Index Fund and the Fidelity Total Market Index Fund indicates redundancy, as these funds likely hold many of the same stocks. This redundancy does not contribute to diversification and, in effect, concentrates risk. Reducing overlap by reallocating assets could enhance the portfolio's risk-adjusted returns.
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.
Optimizing the portfolio involves addressing the high correlation between assets to improve diversification without sacrificing the growth objective. Utilizing the Efficient Frontier concept could help identify an asset allocation that offers the best possible risk-return trade-off, based on historical performance. However, it's crucial to remember that optimization is based on past data, which may not predict future performance accurately.
Dividends
- Fidelity Total Market Index Fund 1.00%
- Fidelity 500 Index Fund 1.10%
- Invesco QQQ Trust 0.40%
- Weighted yield (per year) 1.07%
The portfolio's overall dividend yield of 1.07% contributes to its total return, providing a steady income stream in addition to potential capital gains. However, the focus on growth equities, which typically offer lower dividend yields, suggests that income generation is a secondary consideration. Investors seeking higher income might consider increasing exposure to higher-yielding assets.
Ongoing product costs
- Fidelity Total Market Index Fund 0.02%
- Fidelity 500 Index Fund 0.02%
- Invesco QQQ Trust 0.20%
- Weighted costs total (per year) 0.03%
With a total expense ratio (TER) of 0.03%, the portfolio benefits from low costs, which can significantly enhance long-term returns. The emphasis on low-cost index funds and ETFs is a prudent strategy, minimizing the impact of fees on investment growth. This cost efficiency is a positive aspect of the portfolio's construction.
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