The One Asset Class You Should Include In Your Portfolio

2025-10-08 12:34:40 ET

Especially If You Want to Preserve and Grow Capital

Introduction

I initiated a project to identify the asset classes that should be included when prioritizing capital preservation while also achieving sufficient growth to keep pace with inflation. To complete this thought experiment, I examined indices with a history of 25 years or more. With each index, I compared its performance to that of the S&P 500. I wanted to see how it reacted during down markets and other key metrics. The metrics included:

• Down-Market Returns—How did the index perform when the S&P 500 lost money?
• Worst 12-Month Loss—Does the index contain losses?
• Annual Standard Deviation—Is the index less volatile than the market?
• Pure Performance Ratio—Does the index have a strong probability of generating a positive return?
• Risk-Adjusted Return (M2)—What do the returns look like after adjusting for risk?
• Historical Beta—Does the index decouple from the benchmark?
• Coefficient of Determination (R ² )—Does the index offer the potential for diversification?

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