washingtonpost.com  > Business > Columnists > Cash Flow  Quick
Quotes  Page 2 of 2  < Back    How to Beat a Bust  Second,
there's diversification within an asset class. Beyond getting
out of one stock, you want to spread yourself a bit across
different kinds of stocks -- big American companies, small and
medium-size companies, and today, with all the worries about the
federal deficit, the trade deficit and the dollar, some foreign
stocks as well.  Third, there's asset class diversification.
That refers to other types of investments such as bonds, real
estate and the like. This sort of diversification helps under
different economic conditions. Bonds, for example, rise in price
when interest rates fall. Thus, while a slowing economy can be
bad news for stocks, it may not be for bonds. That's because
when the economy slows, the Federal Reserve tends to cut
interest rates. If rates fall, prices of bonds go up, helping to
offset stocks' dip.  _____Investing Columns_____ Washington
Investing The Color of Money Cash