This is the first in a four-part series on investing.
If your portfolio has suffered serious casualties during this bear market, it may be time to rethink your strategy.
First, if you lost money you needed to spend soon, ask yourself if that money should be in stocks at all. "If you can't wait three to five years for returns, then you shouldn't invest in stocks," explains Bill Valentine, president of Valentine Ventures, an investment management firm for individuals.
Instead, invest in fixed-income securities such as bonds and money market accounts. "The bond market is the best way to preserve your capital," says Valentine, who frowns on the high expenses of bond funds. "Buy a laddered portfolio of AAA and AA bonds" -- in other words, a mixture of short, intermediate and long-term bonds. You will receive guaranteed income twice a year, so if you want monthly income, buy bonds that mature in different months.
If you are committed to investing for the long term but find your portfolio spinning from the market gyrations, look outside the U.S. for investments. "Global diversification lowers your portfolio's volatility," says Valentine. "You can find strong growth stocks in Europe, where businesses are growing faster than American ones." Information about international stocks is readily available at Web sites such as worldlyinvestor.com.
Of course, the bottom (or near bottom) of a bear market is a great time for bargain hunting in the U.S., too. "There are reasonably priced technology and retail stocks out there," says Valentine. The health care industry is also hot, with most sectors boasting above-average growth rates. "Health care stocks will probably be hot for the next three years, but they could dip a little in the next few months," Valentine cautions.
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If you haven't checked your asset allocation in the last few months, use the Asset Allocator to see if you're still on track.
