Have you ever wondered why your broker doesn't protect your portfolio when the market is crashing?
It seems like a reasonable question to me. In 2008-09 when the market was in a serious free-fall the protection that the average investor thought he had through diversification was absent. That's because diversifying your portfolio is no protection when the entire market is declining. Many portfolios declined by half. It wasn't pretty.
Yet, the mutual funds that constitute the vast majority of American investment remained 100% in the market. You'd think that a professional fund manager would move to protect his clients, but the investor usually expects his stockbroker to do that. The average stockbroker, however, is constrained by the firm he works for. It's a fact that most mutual funds stay at least 80% invested in the market, even when it's crashing.