How can I diversify in a difficult market?

For a while, it seemed as though there was no refuge from the stock market's problems. International stocks, real estate, commodities, bonds, and precious metals all got hit simultaneously. The phrase "diversification can't guarantee a profit or ensure against the possibility of a loss in a declining market" never seemed more true.

And yet heightened uncertainty underscores the importance of hedging your bets. The more uncertainty, the more important it becomes to be able to take advantage of whatever investments are working best. Even if all asset classes are struggling, some may struggle less than others. Also, some investments and strategies can be used specifically to offset potential problems with other investments. Owning a variety of investments can improve your ability to navigate rapidly changing conditions. Here are some balancing acts to consider when analyzing whether your portfolio might benefit from additional diversification.