Diversification and Bull Markets Calculator

Allocating your investments among the three main asset classes - stocks, bonds and cash - is an effective way to deal with market risk. Trying to predict which asset class will be the best performer each year is difficult because each class responds differently to changes in the economy or investment market place. When the market in one asset class is declining, its likely that another class is on the upswing. This calculator shows how diversification affects the growth of portfolios during any complete bull-bear market cycle between 1968 and 2002. Diversified portfolios generally provide lower returns during bull markets than a stock-only portfolio, but during bear markets, they cushion the impact of falling stock prices. You won't hit the high "highs" of the market, but you'll also minimize the low "lows."

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