[vc_row][vc_column css=”.vc_custom_1532034303005{background-color: #ffffff !important;}”][vc_row_inner][vc_column_inner][mk_padding_divider size=”150″][mk_fancy_title size=”38″ force_font_size=”true” size_smallscreen=”38″ size_tablet=”30″ size_phone=”30″ font_weight=”bold” txt_transform=”capitalize” margin_bottom=”0″ font_family=”none”]
The Magic Behind Modern Portfolio Theory
[/mk_fancy_title][vc_column_text css=”.vc_custom_1717020513881{margin-bottom: 0px !important;}”]“Diversification is the only free lunch in investing.” -Harry Markowitz[/vc_column_text][mk_divider style=”thin_solid” margin_top=”0″][/vc_column_inner][/vc_row_inner][vc_row_inner][vc_column_inner width=”1/4″][vc_single_image image=”3671″ img_size=”full”][/vc_column_inner][vc_column_inner width=”3/4″][vc_column_text css=”.vc_custom_1717020840884{margin-bottom: 0px !important;}”]Nobel Prize laureate Harry Markowitz coined the phrase, “diversification is the only free lunch in investing” based on his work with modern portfolio theory. Markowitz’s groundbreaking work demonstrated that, through diversification, investors could decrease portfolio risk without sacrificing returns or conversely increase returns without proportionately increasing risk.
[/vc_column_text][/vc_column_inner][/vc_row_inner][vc_row_inner][vc_column_inner][mk_divider style=”thin_solid” margin_top=”0″][/vc_column_inner][/vc_row_inner][vc_row_inner][vc_column_inner css=”.vc_custom_1553117738807{background-color: #ffffff !important;}”][vc_column_text css=”.vc_custom_1716400074470{margin-bottom: 0px !important;}”]
[/vc_column_text][mk_fancy_title color=”#000000″ size=”20″ font_weight=”bold” margin_bottom=”0″ font_family=”none”]Combining Offensive and Defensive Strategies[/mk_fancy_title][vc_column_text css=”.vc_custom_1717019837137{margin-bottom: 0px !important;}”]Markowitz concluded that maximum diversification benefits could be achieved when the correlation between investments is zero. A simplified approach: allocate 100% to an offensive strategy, such as long-only equities, and another 100% to a defensive strategy, such as trend following, in the same portfolio. As demonstrated below from actual index data, returns have been more than double yet volatility was only 33% higher than the average of each investment individually (not double) with this approach.[/vc_column_text][vc_column_text css=”.vc_custom_1695670169602{margin-bottom: 0px !important;}”][/vc_column_text][/vc_column_inner][/vc_row_inner][vc_row_inner][vc_column_inner css=”.vc_custom_1553117738807{background-color: #ffffff !important;}”][mk_fancy_title color=”#000000″ size=”20″ font_weight=”bold” margin_bottom=”0″ font_family=”none” align=”center”]UNLOCKING THE MAGIC OF MODERN PORTFOLIO THEORY BY COMBINING OFFENSE AND DEFENSE IN ONE PORTFOLIO. GROWTH OF $10,000 (LOGARITHMIC SCALE).[/mk_fancy_title][vc_single_image image=”3669″ img_size=”full”][vc_column_text css=”.vc_custom_1717019892762{margin-bottom: 0px !important;}”]Source: Catalyst Capital Advisors LLC and Bloomberg LP. Data from December 1999 to March 2024. Offense = S&P 500 TR Index. Defense = SG CTA Trend Index.[/vc_column_text][vc_column_text css=”.vc_custom_1695670169602{margin-bottom: 0px !important;}”][/vc_column_text][mk_table]
| Statistic | Offense Only | Defense Only | Offense + Defense |
|---|---|---|---|
| Annualized Return | 7.3% | 6.0% | 13.9% |
| Annualized Volatility | 15.4% | 13.5% | 19.2% |
| Sharp Ratio (rf=0.25%) | 0.46 | 0.42 | 0.71 |
[/mk_table][/vc_column_inner][/vc_row_inner][vc_row_inner][vc_column_inner css=”.vc_custom_1553117738807{background-color: #ffffff !important;}”][mk_fancy_title color=”#000000″ size=”20″ font_weight=”bold” margin_bottom=”0″ font_family=”none”]A summary of the magic: more than double the expected returns, volatility only 33% higher than the average of both strategies, and almost double the risk-adjusted returns.[/mk_fancy_title][vc_column_text css=”.vc_custom_1717020300081{margin-bottom: 0px !important;}”]For more information on our offerings and important disclosures, please visit CatalystMF.com.[/vc_column_text][vc_column_text css=”.vc_custom_1695670169602{margin-bottom: 0px !important;}”][/vc_column_text][/vc_column_inner][/vc_row_inner][mk_padding_divider size=”20″][vc_raw_html]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[/vc_raw_html][/vc_column][/vc_row]
