Every portfolio, no matter how well it is constructed, is vulnerable to something.Investors who rely on actively managed funds or broad-based index funds often end up too heavy in the financial sector; those who go with individual stocks and sector funds face a similar threat if too many of their holdings correlate too closely. One less-obvious example of this problem is with emerging-market stocks and mining stocks. Both segments have been terrific sources of outperformance for several years, and there is a compelling fundamental argument in the growth rates and increased demand to tell us that both segments should continue to do well over the long term. As this chart of iShares S&P Global Materials Index Fund ( MXI) and BLDRS Emerging Market 50 ADR Index Fund ( ADRE) shows, the correlation between the two has been very tight, including during several big and fast corrections.
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