A growth-focused portfolio with strong U.S. exposure and moderate international diversification
Report created on Jan 23, 2025Risk profile
5/7
Diversification profile
4/5
Positions
-
FZ FIDELITY ZERO TOTAL MARKET INDEX FUND
FZROX 70.00% -
FZ FIDELITY ZERO INTERNATIONAL INDEX FUND
FZILX 30.00%
The portfolio is heavily weighted towards the FIDELITY ZERO TOTAL MARKET INDEX FUND at 70% and the FIDELITY ZERO INTERNATIONAL INDEX FUND at 30%. This allocation reflects a strong focus on U.S. equities with a significant, yet smaller, international component. The composition aligns with a growth profile, emphasizing broad market exposure. While the allocation is simple, it provides coverage across various sectors and geographies, albeit with a heavier U.S. tilt. This setup is beneficial for capturing overall market growth but could be enhanced by further diversifying into other asset classes like bonds for risk mitigation.
Growth
Historically, the portfolio has shown a robust Compound Annual Growth Rate (CAGR) of 12.40%, indicating strong past performance. However, it also experienced a maximum drawdown of -34.42%, highlighting potential volatility. With only 16 days accounting for 90% of returns, it underscores the importance of being consistently invested to capture these critical days. While past performance is no guarantee of future results, the portfolio has outperformed many benchmarks, suggesting that its composition has been effective in capturing market growth.
Projection
The Monte Carlo simulation, which uses historical data to project future outcomes, suggests a wide range of potential returns. With 1,000 simulations, the 5th percentile projects a modest growth of 6.2%, while the median and 67th percentiles suggest more substantial gains of 264.9% and 405.3%, respectively. The high number of simulations with positive returns (958) indicates a favorable outlook, though it's important to remember that these projections are not certainties but possibilities based on past data patterns.
Asset classes
- Stocks 100%
The portfolio is entirely allocated to stocks, comprising 100% of the asset classes. This concentration in equities is typical for a growth-focused strategy, aiming for higher returns at the cost of increased volatility. While this setup can capitalize on market upswings, it lacks the stability that bonds or other asset classes might offer. For investors seeking less volatility, incorporating a mix of asset classes could provide a buffer against market downturns, enhancing overall portfolio resilience.
Sectors
- Technology 26%
- Financials 17%
- Consumer Discretionary 11%
- Industrials 11%
- Health Care 10%
- Telecommunications 8%
- Consumer Staples 6%
- Energy 4%
- Basic Materials 3%
- Utilities 3%
- Real Estate 3%
Sector allocation is diverse, with the largest exposure in Technology at 26%, followed by Financial Services at 17%, and Consumer Cyclical at 11%. This distribution is typical of a growth-oriented portfolio, focusing on sectors with high growth potential. However, a high concentration in technology can lead to increased volatility, especially during interest rate hikes. Balancing sectors more evenly could mitigate sector-specific risks, ensuring the portfolio remains resilient across varying economic conditions.
Regions
- North America 72%
- Europe Developed 12%
- Japan 5%
- Asia Emerging 4%
- Asia Developed 3%
- Australasia 2%
- Africa/Middle East 1%
- Latin America 1%
Geographically, the portfolio is predominantly exposed to North America at 72%, with smaller allocations to Europe Developed and Japan. This heavy U.S. focus aligns with the typical growth strategy but may limit exposure to other potentially high-growth regions like emerging markets. Increasing geographic diversification could reduce regional risk and provide access to different economic cycles. A more balanced global approach might enhance long-term returns and stability.
Market capitalization
- Mega-cap 44%
- Large-cap 32%
- Mid-cap 18%
- Small-cap 5%
- Micro-cap 1%
The portfolio's market capitalization is skewed towards larger companies, with Mega caps at 44% and Big caps at 32%. This focus on large-cap stocks offers stability and lower volatility compared to small-cap stocks, which are more volatile but can provide higher growth potential. While the current allocation supports a stable growth strategy, incorporating more small and medium-cap stocks could enhance growth prospects, albeit with increased 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 appears to be well-positioned on the Efficient Frontier, suggesting a favorable risk-return balance given its current assets. While it is optimized for growth, adjustments could be made to enhance this balance further. By reallocating within the current asset classes, the portfolio may achieve a more efficient risk-return ratio. However, this optimization focuses solely on the current holdings and may not account for broader diversification goals.
Dividends
- FIDELITY ZERO TOTAL MARKET INDEX FUND 1.10%
- Weighted yield (per year) 0.77%
The portfolio's dividend yield is relatively low, with the FIDELITY ZERO TOTAL MARKET INDEX FUND yielding 1.10%. This is consistent with a growth-focused strategy, where the emphasis is on capital appreciation rather than income generation. For investors seeking income, incorporating higher-dividend-paying stocks or funds could supplement returns. However, the current setup is suitable for those prioritizing growth over immediate income.
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