Spectacular returns may be obtained by putting all your eggs in one basket and watching that basket very closely. Unfortunately, if that basket drops, one can get wiped out. Think Enron. By spreading your money through different asset classes (the “don’t put all eggs in one basket” plan of action) you remove the risk of a concentrated portfolio. There are six primary asset classes: stocks, bonds, real estate, collectibles, commodities and cash. Everything else is a hybrid. Spread the portfolio into the sectors that are out of favor and rebalance when appropriate. Of course, a diversified portfolio does not assure a profit or protect against loss in a declining market.