Each of the traditional
asset
classes
— stocks, bonds, and cash — tends to
produce its strongest returns under different market conditions
than the other asset classes do.
For example, stocks often shine when corporate
earnings are strong and financial markets are expanding. Yet this
same environment frequently has the opposite effect on bonds,
so that they provide lower than average
returns.
On the other hand, bond returns often rise
in a period when stock values drop. That may happen when
interest
rates
go up or when corporate earnings don't meet investor expectations.
If you have some money in both stocks and bonds, you'll be in
a position to benefit from owning the one that's up, while limiting
your losses on the one that's down.
