Investing is frequently seen as a delicate balance–aiming to grow wealth while managing risk. Yet markets are ever-changing, and no single asset class leads the pack every year. That’s why long-term success isn’t about timing the market or chasing hot returns, but about thoughtfully spreading risk across asset classes that have historically moved in different directions. The core principle behind diversification is that different asset classes tend to react differently to shifts in the economy and markets. When one moves in one direction, another may move the opposite way (see Exhibit 1 below). This is especially evident in the long-standing inverse relationship between stocks and bonds. For decades, the two have acted like a seesaw–when stocks drop, bonds often rise, and the reverse holds true. This natural offset plays a key role in helping to steady a portfolio during periods of market volatility. However, it holds true within the equity markets too. For this reason, Linden Thomas & Company didn’t stop with a single Earnings Focused Index, because we knew that no single asset class or sector would do well every year. The answer was