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Is Diversification Another Failed Market Theory?

Tuesday, August 30, 2011 - 5:27 AM
From USA Today:
During the market's most recent downturn, classic stock and bond diversification did exactly what it was supposed to. Stocks, as expected during a rout, sold off harshly. But bonds, specifically Treasury securities, actually rallied and pushed yields to historic lows. Investors who owned both stocks and bonds, or diversified themselves, successfully shielded themselves against volatility.

The author conveniently left out the 2008 market crash.
Ken TuminKen Tumin5,468 posts since
Nov 29, 2009
Rep Points: 125,029
1. Tuesday, August 30, 2011 - 2:21 PM
Bogleheads :: View topic - Confused - diversifying into bonds vs. choosing bond funds

Interesting thread on this issue. Poster Nisiprius has some good insights.

Of course, if you want zero correlation to stocks, holding bonds to maturity (or CDs, which are just another type of bond) is the ticket.
BozoBozo137 posts since
Feb 14, 2011
Rep Points: 937