Ten Tips to Beat the Bear

03/18/2008 12:00 am EST

Focus: MARKETS

Doug Fabian

Editor, Successful ETF Investing, ETF Trader's Edge, Weekly ETF Report, and ETFU.com

Doug Fabian, editor of Successful Investing, thinks we're in for a rough patch in the markets and economy and he comes up with a checklist on how to cope.

The way I see it, we are dealing with four separate bear markets right now. Real estate, equities, municipal and mortgage backed securities, and the US dollar all are struggling mightily, and don't think for one moment that this thing is going to blow over in a few weeks.

As the market continues flirting with the January lows, I suspect that one of these days the bear is going to have its way and just send stocks down well below January's nadir.

Until then, however, I think [the Standard & Poor's 500] is going to do more of the same, which is trade between 1325 and 1380.
To help you survive these conditions, I've prepared a checklist of what to do and what issues you need to make sure you're addressing right now:

  1. Preserve your capital. The worst mistake is losing money when you don't have to. Rein in the greed and cultivate a sound level of good, old-fashioned fear.
  2. Consolidate your accounts. Now is the time to get all of your money in one place.
  3. Just say no to high yield. Any security that is paying greater than 4% right now is risky, so make sure you know the details on all of your income offerings.
  4. Municipal bonds are in big trouble. Weird things happen in bear markets, and in this brutal credit bear we are seeing prices of municipal bonds plunging. Don't assume your muni bonds are safe.
  5. Uninsured bank deposits-just say no. Under no circumstance should you have more than $100,000 at any one bank. My advice for an ultra safe investment vehicle is a Treasury-only money fund.
  6. Pay off your debts. If you have cash, pay down your credit cards, student loans, home equity credit lines, etc.
  7. If you have considerable assets and if you are not attending to those assets, hire a fee-only investment advisor to help you. If you're not following these markets closely, find someone who will do the work for you.
  8. Stay away from stocks right now, including international stocks. Most portfolios I am looking at are still fully invested. Now is not the time to have a bull market portfolio.
  9. Get your taxes done and spend more time managing your tax liabilities in the future. I am working on my 2007 taxes right now, and I am setting up better tracking systems for 2008.
  10. Patience, patience, patience. This market tumult could be a long, drawn-out affair. We don't know how long this storm will last but the winds are getting stronger, not lighter. Be conservative, be mindful, and be cautious. Together, we'll weather this storm.
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