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Play It Safe

There's plenty of room in your portfolio for stocks--but to ride the wave of market volatility, diversify with bonds, too.

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This story appears in the July 2007 issue of Entrepreneur. Subscribe »

This spring was a volatile one for Wall Street. The S&P 500 Index fell off a cliff in late February, dropping 3.5 percent in a day. Yet in April, the most-watched index, the Dow Jones industrial average, skipped over the 13,000 mark for the first time in its history. And in early May, the S&P 500 Index climbed above the 1,500 barrier for the first time in seven years.

Volatility's not all bad. It generates positive returns as well as negative ones. Still, a topsy-turvy period like we've just experienced provides a reminder that a little diversification goes a long way--and not just across different types of stocks, but between asset classes, too. The bottom line: Even for long-term investors, it's a good idea to keep stable, conservative holdings in your portfolio.

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