Balancing Act: Managing Diversification According to Your Risk Tolerance

Diversification is often touted as the cornerstone of prudent investing. By spreading your investments across different asset classes, you can potentially minimize risk and maximize returns. However, managing diversification isn’t a one-size-fits-all approach. Your risk tolerance plays a crucial role in determining the optimal balance for your portfolio.

Understanding your risk tolerance is the first step. Are you comfortable with the possibility of larger fluctuations in your portfolio value, or do you prefer steadier, albeit potentially lower, returns? Your answer to this question will guide how you allocate your assets.

For those with a higher risk tolerance, a more aggressive approach to diversification may be appropriate. This could involve investing a larger portion of your portfolio in assets with higher volatility, such as stocks. One option to consider is the Nasdaq-100 index, which tracks the performance of 100 of the largest non-financial companies listed on the Nasdaq stock exchange. While investing in individual stocks can be risky, an index like the Nasdaq-100 offers exposure to a diversified range of companies, spreading risk across various sectors.

On the other hand, if you have a lower risk tolerance, a more conservative approach may be preferable. This could involve allocating a greater portion of your portfolio to less volatile assets, such as bonds or real estate investment trusts (REITs). While these assets may offer lower returns compared to stocks, they can provide stability during periods of market volatility.

Regardless of your risk tolerance, regular review and rebalancing of your portfolio are essential. Market conditions and your personal financial situation may change over time, necessitating adjustments to your asset allocation. By staying vigilant and proactive, you can ensure that your diversification strategy remains aligned with your risk tolerance and investment goals.

Managing diversification according to your risk tolerance is key to building a resilient investment portfolio. Whether you lean towards a more aggressive or conservative approach, understanding your comfort level with risk is essential. By incorporating assets like the Nasdaq-100 index and regularly monitoring your portfolio, you can strike the right balance between managing risk and seeking reward.

Important Information

An investment in the Fund involves risk, including possible loss of principal. Fund information is not intended to represent future portfolio composition. Portfolio holdings are subject to change and should not be considered a recommendation to buy individual securities.

The Fund invests in the largest non-financial companies that are traded on the Nasdaq Stock Market. They are currently concentrated in the technology sector which has been among the volatile sectors of the U.S. stock market. During a declining stock market, this fund would lose money. It would potentially lose more money than other large cap funds.

Nasdaq®, Nasdaq-100® and Nasdaq-100 Index® are trade or service marks of The Nasdaq Stock Market, Inc. which with its affiliates are the “Corporations”) and are licensed for use by the Fund. The Fund has not been passed on by the Corporations as to their legality or suitability. The Fund is not issued, endorsed, sold, or promoted by the Corporations. The Corporations make no warranties and bear no liability with respect to the Fund.

It is not possible for individuals to invest directly in an index. Performance figures for an index do not reflect deductions for sales charges, commissions, expenses or taxes.

Shelton Funds are distributed by RFS Partners, a member of FINRA and affiliate of Shelton Capital Management.

Investors should consider a fund’s investment objectives, risks, charges, and expenses carefully before investing. The prospectus contains this and other information about the fund. To obtain a prospectus, visit www.sheltonfunds.com or call (800) 955-9988. A prospectus should be read carefully before investing. Diversification does not assure a profit or protect against lost in a declining market.

INVESTMENTS ARE NOT FDIC INSURED OR BANK GUARANTEED AND MAY LOSE VALUE.