The New Rules for Investing Your Money

A repeat of 2008, when almost everything tanked, is unlikely. It's still a good idea to spread your risk.

The wisdom of investing in a smorgasbord of categories rests on the premise that something always works. U.S. stocks in a funk? Buy bonds and foreign stocks. The dollar is plunging? Offset it with income funds from countries with strengthening currencies. Worried about inflation? Add oil, gold and other commodities.

This strategy, which is known as diversification, rescued many an investor during the 2000-02 bear market. Even during the free fall of major U.S. stock indexes -- which tilt toward large companies -- bonds, small-company "value" stocks and real estate investment trusts made money, enabling investors with well-blended portfolios to avoid catastrophic damage.

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Jeffrey R. Kosnett
Senior Editor, Kiplinger's Personal Finance
Kosnett is the editor of Kiplinger's Investing for Income and writes the "Cash in Hand" column for Kiplinger's Personal Finance. He is an income-investing expert who covers bonds, real estate investment trusts, oil and gas income deals, dividend stocks and anything else that pays interest and dividends. He joined Kiplinger in 1981 after six years in newspapers, including the Baltimore Sun. He is a 1976 journalism graduate from the Medill School at Northwestern University and completed an executive program at the Carnegie-Mellon University business school in 1978.