The Big Screen: The Junkie's Guide to Diversification

If all this volatility has convinced you to diversify your fund portfolio beyond growth and tech funds, let this be your guide.

Face it: Reading your account statement has become a painful experience. Over the last 12 months, the Nasdaq Composite and the average tech fund have lost more than half their value. And thanks to their fat tech weightings, big-cap, mid-cap and small-cap growth funds, which gobbled up the lion's share of fund sales in recent years, are down more than 25%, according to Chicago fund tracker Morningstar. If you're like a lot of investors, you're looking for ways to diversify your portfolio beyond growth and tech stocks. Tethering your portfolio more closely to the market might not lead to eye-popping gains in frothy years like 1999, but it also won't leave you wondering what truck just hit you when things cool down, as they have over the last 12 months.

If you're on the diversification kick, the Big Screen is here for you. Typically we focus on one fund category or another. Today we're putting it all together for you in a tidy little package. The first step is figuring out what a diversified portfolio looks like. Let's use the Wilshire 5000 Total Stock Market Index as a yardstick. The next step is a bit trickier: Wading through the thousands of funds out there to figure out which you'd like to own. ...