One thought on “Negative Correlated Assets”

  1. Mike Finley says:

    You need negative correlated assets in your portfolio so everything doesn’t go down at the same time. What is negative correlated assets? Assets that go in different directions. Stocks and high quality government and corporate bonds would be one good example.

    These two asset classes tend to go in different directions much of the time (but not all of the time). It is the see saw affect. One is going up and the other is going down. These keeps your portfolio from tanking as one asset class keeps you afloat during the stormy weather.

    There are other negative correlated asset classes, but they are more correlated than stocks and quality bonds in most cases. Here are a few:

    Emerging Market stocks and U.S. stocks.
    REITs (commercial real estate) and large cap U.S. Stocks.
    Small company stocks and large company stocks.
    Developed Market stocks and U.S. stocks.
    Value stocks and growth stocks.
    Short-term bonds and intermediate-term bonds.

    Here is the key when applying this information to your life. Work at owning all of these asset classes in your portfolio over time to reduce the volatility (not eliminate it) and increase your returns. Wealth to follow! Learn more about this issue by reading What Color is the Sky.

Leave a Reply to Mike Finley Cancel reply

Your email address will not be published. Required fields are marked *

The Crazy Man in the Pink Wig