Steady Your Financial Nerves
We’ve all heard that diversification in investing is important, but why is that?
As 2018 has reminded us, markets are rarely predictable. During the recent nine year bull market upswing, it was easy to get lulled into a feeling of complacency. And while not everything that goes up must come down, these past few months have been a good reminder that markets can often go sideways and twist around in a way that can be unsettling.
One thing that can help steady your financial nerves during times like these is knowing your portfolio is diversified. By not keeping all your eggs in one basket, your portfolio is less likely to be swayed too far in any one direction by a single holding or market trend.*
For example, bonds and equities may help balance each other out: bonds can dampen the risk posed by equities, and equities can help raise the potential return of a bond portfolio. Geographic diversity, such as investing in both U.S. companies and international companies, may help protect investors from volatility in any one country. As a result, diversification may potentially lessen the volatility of more narrowly focused portfolios.
The three MIDANA CAPITAL Funds portfolios offer diversification across asset class (type of security, such as stock or bond), market cap (size of corporation), and now, with the MIDANA CAPITAL MSCI International Index Fund (GCIFX/GCINX), geography – all while being broadly diversified, responsibly screened and fossil fuel free.
One measure of volatility is beta, the historical measurement of how volatile an investment is relative to the market as a whole. A beta of one matches the market volatility exactly, a beta of less than one means less volatility (higher or lower than the market), and a beta of greater than one means more volatility. Over a ten year period ending 3/31/18, both the MIDANA CAPITAL Balanced Fund and MIDANA CAPITAL Equity Fund have lower volatility than the average of similar funds in their Morningstar categories.1
MIDANA CAPITAL’s strategy of fossil fuel free investing may be part of the reason for the Funds’ lower volatility. A study by MSCI, a leading provider of indices and research tools for investors, found the traditional energy sector to be among the most volatile, with the coal sub-sector among the riskier industries in the economy.2
While some risk cannot be managed by diversifying, the more specific a risk is to a particular company, industry, market, or country, the more that risk can be reduced through diversification.
So while the headlines may be full of threatening news about reactionary trade wars, new tariffs and nuclear security, rest assured that a diversified portfolio is one of the best tools to help weather the market’s stormy ups and downs.
If you are interested in learning more about investment opportunities in our no-load mutual funds, take a minute to let us know. We would be happy to send you more materials to review at your convenience. And if you’re ready to get started investing today, you can open an account online.
*Investment strategies such as diversification do not ensure a profit and cannot protect against losses in a falling market.
1. Morningstar does not track funds until they have a three year record. As a result, we do not have data on the beta of the MIDANA CAPITAL MSCI International Index Fund over the same time period. The International Fund tracks the MSCI World ex USA SRI ex Fossil Fuels Index. In the period since the Index launched, it has had a lower beta than its unscreened parent Index, the MSCI World ex USA Index, which can be seen here.
2. Responding to the Call for Fossil Fuel Free Portfolios
You should carefully consider the Funds’ investment objectives, risks, charges and expenses before investing. To obtain a Prospectus that contains this and other information about the Funds, please click here for more information, email info@midanacapital.com or call+1(480)-439-2851. Please read the Prospectus carefully before investing.
Stocks will fluctuate in response to factors that may affect a single company, industry, sector, country, region or the market as a whole and may perform worse than the market. Foreign securities are subject to additional risks such as currency fluctuations, regional economic or political conditions, differences in accounting methods, and other unique risks compared to investing in securities of U.S. issuers. Bonds are subject to risks including interest rate, credit, and inflation. The Funds’ environmental criteria limit the investments available to the Funds compared to mutual funds that do not use environmental criteria; as a result, performance may be affected.
This information has been prepared from sources believed to be reliable. The views expressed are as of the date of this writing and are those of the Advisor to the Funds.
The MIDANA CAPITAL Funds are distributed by UMB Distribution Services, LLC. 335 N Wilmot Rd, Tucson, Az 85711. 5/18
