Cowards Beward!

If you are scaredy cat like me when it comes to the stock market, David Landis wrote a good article entitled How to Protect Your Profits in the January 2010 edition of Kiplinger’s – Personal Finance. In the magazine, Landis listed 7 things to do to help ease you through these financial times while hanging on to most of your hard earned dollars, even allowing you to earn more toward your retirement goals.

Of the 7 recommendations, 2 stood out as simple for anyone who is both cautious and not an expert investor. The first is to raise your cash holdings. This can be done in either of two ways; by converting a percentage of our stock investments (he tossed out 30%) to cash and placing this money in a secure account, such as a money market or Treasury bills. The second possibility is to redirect some of the money going into your 401K to the more secure money market accounts for the time the market is in flux.

The second recommendation, which really should be done annually, is to rebalance your portfolio. You can sell off stocks that have done well and put these assets into stocks that have not done so well during the economic downturn. This allows you to follow the investment concept of selling high and buying low so you can take advantage of the market downturn to acquire stocks when they are “on sale”.

I was very excited when I read this article because it supports how I feel the average woman may want to look at the market. We tend to see the market like investing our salary in the nearest poker game. No one wants to see their hard earned cash wiped out in a bad market and not many of us are great at the fine points of investing. But this is a common sense approach supported by looking at trends of investing over an estimated 50 year period. The stock market does follow a natural progression of ebbs and flows. Do plant your retirement your money where it can grow over the years, but for those bad seasons, protect as much as you can in preparation for the next good season. This will mean that you will have to look at your investments more frequently than you may like, but it will also mean that you can work your stocks to your retirement advantage.