Market Volatility and Diversification

How a Fund is Diversified Matters

For a fund (other than a money market fund) to qualify as "diversified," 75% of the fund's portfolio must be invested so that no more than 5% of the total portfolio is invested in any one company. The 1940 Investment Company Act also stipulates that the 5% cannot control more than 10% of that company's outstanding stock. The remaining 25% may be invested in any way as long as it complies with the fund's investment objectives and strategies. It would be possible to invest that entire 25% portion in one company.

Money Market Fund Guidelines

Money market funds have even more stringent guidelines than other mutual funds. The State Farm® Money Market Fund must invest its assets so that no more than 5% are invested in any one company. The assets may only be used to purchase short-term securities (13-months or less to maturity) such as commercial paper, repurchase agreements and negotiable CDs.

Money market funds are limited to purchasing securities that are rated highly by a nationally recognized statistical rating organization.

However, the financial difficulties of one company, country, and/or sector could affect the fund net asset value. The difficulties in one sector of the economy may cause a ripple effect that creates a downturn of the securities markets in general.

Our managers attempt to minimize the effects of any downturn in any particular company, country and/or sector by investing in a diverse portfolio.

Risk Disclosures

Investing involves risk, including potential for loss.

Diversification does not assure a profit or protect against loss.



Not FDIC Insured

  • No Bank Guarantee
  • May Lose Value