If you ever needed proof that asset-diversification works, consider this example by Dean Witter:
If you invested $100,000 for 25 years in an interest-bearing product yielding 8 percent, your investment would be worth $684,850 at the end of the period, assuming all dividends were reinvested.
But what would happen if you divided the $100,000 evenly among five investments -- $20,000 in each -- with the following results?
* You lost every dime of the first $20,000.
* You broke even on the second $20,000.
* You earned 5 percent a year on the third $20,000.
* You earned 10 percent a year on the next $20,000.
* You earned 15 percent a year on the final $20,000.
Despite the poor performance of the first two investments, you still would end up with $962,800 after 25 years.
That's $277,950 more than in the first example.
By spreading your money around, you stand a better chance of having some of your assets in a place where they will grow, even if some of your other investments perform poorly.