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Two Yo-Yos Are Better Than One

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Think of investing risk (in broad terms) as two yo-yos — one for stocks, the other for bonds. The stock yo-yo has a much longer string than the bond yo-yo, so that when you fling it down it comes precariously close to scuffing the ground. The string on the bond yo-yo, however, is so short it barely reaches your knee on the downswing.

As you climb the hill to retirement (and beyond!) working your yo-yos, one in each hand – upswings and downswings – you notice the yo-yos move differently to each other. Rather than both of them going down and up together, they tend to move opposite to one another. As the stock yo-yo is going down, the bond yo-yo is coming up, and vice versa.

Get it? I think you do: Two yo-yos are better than one.

Rock on,

Ross


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