Commodities and Emerging Markets have performed poorly in the last few years. Should you sell low?
While it would be fun to hold a Portfolio in which all of the asset classes were going up at the same time, it would be a nightmare if they were all moving down at once.
To protect against epic losses, investors seek uncorrelated returns — asset classes that behave dissimilarly so that a portfolio’s ingredients don’t all move in the same direction at the same time.
But diversified portfolios should be built with the knowledge that including uncorrelated assets means always having to endure pain in part of the portfolio. That part will be going down or remaining flat, since it tends to move differently from the uncorrelated part that is going up.