A growth-focused portfolio with significant reliance on large-cap U.S. equities
Report created on Jan 21, 2025Risk profile
5/7
Diversification profile
2/5
Positions
-
FX Fidelity 500 Index Fund
FXAIX - US3159117502 95.00% -
AV Avantis® U.S. Small Cap Value ETF
AVUV - US0250728773 5.00%
This portfolio is heavily concentrated in the Fidelity 500 Index Fund, which constitutes 95% of the holdings, with the remaining 5% in the Avantis U.S. Small Cap Value ETF. Such a composition indicates a strong focus on U.S. large-cap stocks, primarily from the S&P 500. While this allocation provides exposure to established companies, it limits diversification across asset classes. Diversifying into other asset types could enhance risk management and potentially improve returns.
Growth
Historically, the portfolio has delivered a robust Compound Annual Growth Rate (CAGR) of 17.10%, outperforming many benchmarks. However, the maximum drawdown of -34.39% highlights the potential for significant losses during market downturns. This performance underscores the importance of balancing risk and reward. To mitigate drawdowns, consider introducing assets with lower correlation to large-cap U.S. equities, such as bonds or international stocks.
Projection
Monte Carlo simulations, which use historical data to project future outcomes, suggest an optimistic outlook for this portfolio. With an annualized return of 19.79% across simulations, the potential for growth is substantial. However, the reliance on historical data means these projections are not guaranteed. To manage expectations, consider regularly reviewing and adjusting the portfolio based on changing market conditions and personal financial goals.
Asset classes
- Stocks 100%
The portfolio's asset allocation is 100% in stocks, which limits diversification benefits. While stocks can offer high returns, they also come with higher volatility. Introducing other asset classes, such as bonds or real estate, could reduce risk and provide more stable returns. Diversification across different asset types can help protect against market fluctuations and improve the risk-return profile.
Sectors
- Technology 31%
- Financials 14%
- Consumer Discretionary 10%
- Health Care 10%
- Telecommunications 9%
- Industrials 8%
- Consumer Staples 6%
- Energy 4%
- Utilities 3%
- Real Estate 2%
- Basic Materials 2%
- Consumer Discretionary 1%
The portfolio is notably tech-heavy, with 31% allocated to technology stocks. While this sector has driven recent market gains, it is also susceptible to volatility during interest rate changes or regulatory shifts. Balancing the sector allocation by increasing exposure to underrepresented areas like healthcare or consumer staples could mitigate sector-specific risks and enhance overall stability.
Regions
- North America 99%
- Europe Developed 1%
With 99% of the portfolio's geographic exposure in North America, there is limited international diversification. This concentration increases vulnerability to U.S. market-specific risks. Expanding geographic exposure to include developed and emerging markets could provide a hedge against regional economic downturns and tap into growth opportunities outside the U.S.
Market capitalization
- Mega-cap 45%
- Large-cap 33%
- Mid-cap 17%
- Small-cap 3%
- Micro-cap 2%
The portfolio is predominantly invested in mega and large-cap stocks, accounting for 78% of the holdings. While these companies are typically stable and well-established, they may offer lower growth potential compared to smaller-cap stocks. Increasing allocation to mid and small-cap companies could enhance growth prospects and diversify market capitalization exposure.
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 allocation could be optimized using the Efficient Frontier, which seeks the best possible risk-return ratio. Adjusting the balance between the existing assets might enhance efficiency, but diversification into additional asset classes could further improve optimization. Focusing on the risk-return trade-off ensures alignment with financial goals while managing volatility.
Dividends
- Avantis® U.S. Small Cap Value ETF 1.60%
- Fidelity 500 Index Fund 1.20%
- Weighted yield (per year) 1.22%
The portfolio's dividend yield is 1.22%, which can provide a modest income stream. While dividends are not the primary focus of a growth-oriented portfolio, they can enhance total returns, especially during periods of market volatility. Consider maintaining a balance between growth and income-generating investments to support long-term financial goals.
Ongoing product costs
- Avantis® U.S. Small Cap Value ETF 0.25%
- Fidelity 500 Index Fund 0.02%
- Weighted costs total (per year) 0.03%
The portfolio benefits from impressively low costs, with a total expense ratio (TER) of 0.03%. This cost efficiency supports better long-term performance by minimizing the drag on returns. Maintaining a focus on low-cost funds is a strength of this portfolio, ensuring that more of the returns are retained by the investor.
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