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Author: x4a54 Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 74759  
Subject: Re: Diversify into Small Cap/International? Date: 7/26/1999 12:18 PM
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The theory of diversification is that when large cap stocks (i.e. the S&P 500)
are down, internationals and small caps will be up. So, I would recommend <SNIP>


not exactly (tho i stand ready to be corrected).
theory of diversification is that when one sector
goes down, the others will do something else, perhaps
go up, perhaps go down less, perhaps go down more. So
you have a kind of 2/3 chance that if one is in the tank,
the others are 'better'. [Used to be a rather nice
inverse correllation between stocks and Bonds, but i'm
not sure that's held lately.]

*i* would Not recommend --you have to decide whether to
try to pick a horse and bet on it, or bet on all three,
or all five. In the long run, you will do best if you
pick The Winner, worst if you pick The 'Loser'.

but i can tell you what i *do* --since my 401(k) is
short term, i gamble. i tried to pick the likely winner
four years out.

'tis important (and , IMO, "Foolish"), to determine what
you will be compfortable with over the time-span of
your investments.


good luck,

jp
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