By James K. Glassman
From Kiplinger’s Personal Finance
The U.S. market as a whole has produced average annual returns of about 10 percent over the past century, but it doesn’t go up 10 percent every year. In roughly one out of four years, it declines—sometimes a lot.
History shows that markets bounce back. But enduring sickening declines isn’t easy. The best way to smooth the ride is through diversification.
The topic today is diversification in the part of your portfolio that consists of stocks and stock funds. The value of diversification seems awfully obvious. Morningstar data in June 2021 showed that about 39 percent of all U.S. stocks had suffered three-month losses of 50 percent or more, but fewer than 1 percent of diversified stock funds had incurred losses that severe….