Is your investment portfolio really diversified?

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There is a fundamental problem with diversification, because over long periods of time, stocks have historically outperformed the other asset classes by a very wide margin. According to Standard and Poors, Inc., and DST Systems, Inc, during the past 30 years (and nearly every rolling 30 year period in history), total return of stocks has been more than 9%, bonds less than 6%, gold about 4%, and cash less than 3%. The more than 3% difference between stocks and bonds means that $100,000 invested for 30 years in stocks would be worth more than $1,400,000, while the same investment in bonds would be worth only $525,000, and in cash $235,000. Not only that, but looking forward with today’s very low interest rates, this difference may be magnified by the next few years of very low returns from bonds and cash (including CD’s).