What to Do When Traditional Diversification Strategies Fail

In 2008, market events showed that some of the protection provided by diversification is lost when correlation among asset classes changes rapidly. Now, the question is: Are traditional diversification concepts no longer applicable due to some systemic change? Or is there still a simple, repeatable approach to diversification that can lead to significant protection against loss of principle?

Many factors could be contributing to recent volatile market behavior, for example, globalization, investor fear, government policies, and alternative investments. This article explores a methodology that attempts to address these factors.

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