A non-correlated portfolio means that you own investments that don’t perform in a similar manner. You don’t want low correlation when the stock market is going up but you are better off if you hold non-correlated assets in down markets.
Going by the results of the last quarter-century, bonds can add value to a portfolio of stocks and stocks funds. Down-market correlations have been negative for government and high-quality corporate bonds. Thus, they may have positive returns in years that stocks lose ground.
High-yield (“junk”) bonds have been more correlated to stocks in up markets and less correlated in down markets, indicating that a small allocation might make sense.
Your basic portfolio should be mainly invested in stocks and bonds, with a mix of large-company, small-company, and medium-sized company stocks. Holding some international stocks, including some in emerging markets, also can provide worthwhile non-correlation.
