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This calculator illustrates the importance of being diversified during bear markets. It compares the performance of a 100% stock portfolio to a diversified portfolio allocated between stocks, bonds and cash during any of the seven bear markets between 1968 and 2002. 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. The average decline in stocks during the seven bear markets since 1968 was 27.5%. By diversifying equally between sticks, bonds and cash, the average decline was reduced to 3.5%.