IN A diversified portfolio it shouldn't really matter how any single investment fares because there's always another going the other way. Still, it would be nice to know whether more of them are likely to go up or down. So here goes.

Take cash first, since it's the easiest. We know interest rates will fall because the Reserve Bank said so. In which case, sticking money into a term deposit will leave you like a shag on a rock. For a start, when it matures you'll get less but, potentially worse, it means you will have missed any upturn in the sharemarket. After all, there is nothing sharemarkets like more than falling interest rates.

Which brings me to fixed interest, a sector that has come under a cloud thanks to the credit crisis. Normally you can rely on it through thick and thin, though its performance in the year to June 30 was pretty lacklustre. Still, in the past 20 years fixed interest has gone backwards only once (in 1993-94 it slipped just 1.1percent) and, were it not for fears of rising inflation, bonds would have to be the investment most likely to succeed this financial year.

It may yet be. Rising inflation will put a floor under bond yields, which will fall to some extent, so producing some capital gains. But it's worth bearing in mind that what is termed fixed interest has become fuzzy. A fixed interest fund, for example, is likely to contain assorted hybrids such as converting preference shares and floating rate securities. These have higher yields than boring old bonds but only because they're a halfway house to shares.

Their prices can be volatile and are just as likely to move on a change in market sentiment as a change in interest rates. "You're loading equity risk into a defensive part of asset allocation," says Andrew Pease, investment strategist at Russell Investment Group. As for the sharemarket, it's impossible to tell whether it has bottomed yet but we sure must be near it. Positives are falling interest rates, the comparative strength of Australia's banking sector and record profits. The negatives: a cooling off of commodity prices; the slump in the dollar that puts the hedge funds off investing here; and a slowing economy.

Then there is a skittish Wall Street - which in this age of globalisation has a disproportionate influence on the market - that could go either way. Judging by past bear markets, we appear to be about halfway. In which case a strong upturn next year is more likely than not.

The asset class that has been trashed the most since the credit crisis came to town has been listed property trusts (LPTs). There's no disputing the reasons: they became overloaded with debt (considering they're supposed to be defensive and have been a staple of super funds) and the market had pushed their prices up too far in the first place. As is the way of markets, though, the fact that LPTs have fallen so out of favour makes them more attractive because they are cheaper. In any case, there's not much evidence that the values of shopping malls, office blocks and industrial estates have been sliding precipitously. "The time will come again when we look at LPTs as defensive," says MLC investment strategist Brian Parker. He predicts they'll have no choice but to get their act together "by selling assets and going back to basics". So no quick recovery there, then.

The other main asset class is international shares - the most volatile investment because as well as the normal market shenanigans there are the even more bizarre currency fluctuations to be reckoned with.

"Self-managed funds are usually 90percent Australian shares but they should allocate more to international shares with growing emerging markets and the dollar coming off, or they'll miss out on growth opportunities," says Michael Hutton of HLB Mann Judd.