Morningstar has an important article on its front page: "The Best Diversifiers For Your Equity Portfolio." These are excerpts:
The Best Diversifiers For Your Equity Portfolio"Many investors may be wondering if the end of that rally could be around the corner. And if it were, how would their portfolios respond?"
"And what we're looking for is a negative correlation coefficient. That would mean if my equities go up, X asset goes down. That's what I want if I'm looking for diversification."
"What surprised me in this latest data run, Susan, was that we didn't have to venture into long-term Treasuries to capture good diversification relative to equities. Short- and intermediate-term Treasuries did the job, too."
"Bloomberg Barclays Aggregate Fund was quite good as a diversifier for an equity portfolio, in part because as currently constituted, these aggregate trackers are very heavily tilted towards U.S. government bonds."
"When we looked at other equity types alongside the S&P 500, you didn't get a lot of bang for your buck in terms of diversification. So, foreign stocks, for example, somewhat uncorrelated to the U.S. equity market, but nonetheless, not an extremely low correlation. Same with U.S. small-caps, not too impressive there. Also, the alternative asset class' performance wasn't especially attractive there either from a diversification standpoint."
Jack Bogle's Words of Wisdom: "Buy a stock index fund and add bonds as you age."