A growth-oriented portfolio with low costs but high asset correlation limiting diversification

Report created on Jan 8, 2025

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

4/5
Broadly Diversified
Less diversification More diversification

Positions

This portfolio consists of three main funds, with a heavy emphasis on U.S. equities. The Fidelity Total Market Index Fund and the FIDELITY ZERO TOTAL MARKET INDEX FUND each hold 40% of the portfolio, while the Fidelity Total International Index Fund Institutional Premium Class makes up the remaining 20%. Compared to common benchmarks, this portfolio is heavily weighted towards domestic equities, which may limit international exposure. Ensuring a balanced mix of asset types can help manage risk and optimize returns. Consider diversifying further by incorporating more international or alternative asset classes.

Growth Info

Historically, this portfolio has achieved a strong Compound Annual Growth Rate (CAGR) of 12.73%, indicating robust past performance. However, the maximum drawdown of -34.66% highlights potential vulnerability during market downturns. Compared to benchmarks, this performance is commendable but underscores the importance of risk management. While past performance can provide insights, it does not guarantee future results. It's crucial to prepare for market volatility by maintaining a diversified and balanced portfolio to protect against significant losses.

Projection Info

Using Monte Carlo simulations, this portfolio's future performance was projected across 1,000 scenarios. The median outcome suggests a potential return of 299.56%, with a 67th percentile outcome of 463.41%. However, the 5th percentile indicates a lower return of 23.2%, emphasizing the uncertainty in future markets. These projections rely on historical data, which may not fully capture future market conditions. It's crucial to regularly review and adjust your portfolio to align with changing market dynamics and personal financial goals.

Asset classes Info

  • Stocks
    100%

The portfolio is predominantly composed of stocks, accounting for 99.94% of its assets, with negligible allocations to cash and other asset classes. This high concentration in equities suggests a strong growth focus but can increase risk during market downturns. Compared to benchmark allocations, which typically include bonds and other asset classes for diversification, this portfolio is heavily skewed towards equities. Introducing a mix of bonds or alternative investments can help balance risk and improve overall stability.

Sectors Info

  • Technology
    28%
  • Financials
    15%
  • Health Care
    11%
  • Consumer Discretionary
    10%
  • Industrials
    10%
  • Telecommunications
    8%
  • Consumer Staples
    6%
  • Energy
    4%
  • Basic Materials
    3%
  • Real Estate
    3%
  • Utilities
    3%

The portfolio exhibits a significant concentration in the technology sector, which constitutes 27.75% of the total. Other notable sectors include financial services and healthcare. While this sector allocation aligns with benchmark trends, it may expose the portfolio to higher volatility, especially during periods of sector-specific downturns. Diversifying across more sectors can help mitigate this risk and provide a more balanced exposure to various economic cycles. Consider reallocating to underrepresented sectors for improved diversification.

Regions Info

  • North America
    81%
  • Europe Developed
    8%
  • Asia Emerging
    3%
  • Japan
    3%
  • Asia Developed
    2%
  • Australasia
    1%
  • Africa/Middle East
    1%

With 81.1% of assets allocated to North America, this portfolio is heavily concentrated in the U.S. market. While this focus aligns with a domestic growth strategy, it limits exposure to international markets. Compared to global benchmarks, which typically have broader geographic diversification, this portfolio may miss out on growth opportunities in emerging markets. Expanding geographic exposure can enhance diversification and potentially capture growth in regions with different economic cycles.

Redundant positions Info

  • FIDELITY ZERO TOTAL MARKET INDEX FUND
    Fidelity Total Market Index Fund
    High correlation

The portfolio's assets exhibit high correlation, particularly between the Fidelity Total Market Index Fund and the FIDELITY ZERO TOTAL MARKET INDEX FUND. This high correlation suggests that these funds tend to move in tandem, reducing the diversification benefits. While correlated assets can provide consistent performance, they may not protect against market downturns. Consider replacing one of these funds with a less correlated asset to improve diversification and manage risk effectively.

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 to achieve a better risk-return ratio. However, the presence of highly correlated assets limits the benefits of such optimization. The Efficient Frontier helps identify the best possible asset mix for a given level of risk, but it requires a diverse range of assets. Consider reducing asset overlap and incorporating a broader mix of asset classes to fully leverage optimization techniques and enhance portfolio efficiency.

Dividends Info

  • Fidelity Total Market Index Fund 0.20%
  • FIDELITY ZERO TOTAL MARKET INDEX FUND 1.20%
  • Weighted yield (per year) 0.56%

The portfolio's dividend yield stands at 0.56%, with the FIDELITY ZERO TOTAL MARKET INDEX FUND contributing a higher yield of 1.2%. While dividends can provide a steady income stream, this yield is relatively modest compared to income-focused portfolios. For growth-oriented investors, dividends play a secondary role, but they still offer a buffer during market volatility. Consider strategies to enhance dividend income if income generation becomes a priority in the future.

Ongoing product costs Info

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

The portfolio benefits from impressively low costs, with a Total Expense Ratio (TER) of just 0.02%. This cost efficiency supports better long-term performance by minimizing fees that can erode returns over time. Compared to industry averages, these costs are exceptionally low, indicating a well-managed portfolio in terms of expenses. Maintaining low costs is crucial for maximizing net returns, and this portfolio is well-positioned in that regard. Continue to monitor fees to ensure they remain competitive.

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