NEWS: The markets were on the defensive from the time the opening bell rang and once again experienced a volatile trading session. When the closing bell rang the indices were sitting near the lows of the session and the Dow was off 440 points or 4.1%. The S&P 500 tumbled 57 points or 4.7% and the NASDAQ was the hardest hit with a drop of 109 points or 4.9%.The three major indices along with the NYSE Composite are trading at new multi-year lows. The Russell 2000 is not yet at a new low, but was down 4.8% today.

The big news today was the surge in commodity prices. Gold closed higher by $70 to finish at $850.50/ounce. In after hours trading the yellow metal rallied another $40 and was last trading near $890. The move was the largest point move ever for the gold futures and the biggest one-day percentage move in 9 years. Oil also moved higher, gaining $6.01 and closed at $97.16/barrel. Crude was also higher in after hours trading, closing in on $98.

THE BOTTOMLINE: Today was a day in which it was extremely difficult to find a stock that was higher. All 30 Dow stocks were lower and only 21 of the 500 S&P stocks were able to post a gain. Of the 21 higher stocks, 10 were commodity related only 7 gained over 2%. To put this into perspective, you had a 1 in 25 chance (4%) of picking a winning stock in the S&P 500. You had the same odds of picking a stock in the S&P 500 that was down at least 12%! When you consider the numbers that were on the table today as an investor you have to be happy with taking a minimal loss in your portfolio. So how was that possible? DIVERSIFICATION.

If you had exposure to the gold stocks or commodity ETFs you could have performed much better than the market and helped lessen the blow of a nearly 5% drop in one day. For example, the Market Vectors Gold Miners ETF (GDX) rallied 11.6% and the SPDR Gold ETF (GLD) gained 11.3%. Any way you want to look at it, right now the key to keeping your portfolio from complete obliteration is diversification. On days like this if you would have been heavily invested in financials your portfolio would have been crushed. The same can be said if you were overexposed to energy stocks earlier this month. But a prudent mix of sectors we feel are capable of outperforming the market over the long-term have been our savior. Granted from day to day some of the sectors will underperform the market, but as a whole they have been able to hold up better then the indices, which is the goal in a bear market. Sure I would love to make money every month, but I am also realistic and have been around the market long enough to know there will be bad months and even years.