Keith Fitz-Gerald

Four Ways to Sidestep the Street's Big Money Bulldozer

    Tweet This

Russia is particularly hard hit and the cost of Russian sovereign-debt-insurance using credit default swaps surged 1,200 basis points last week, which makes it higher than the cost of Iceland's debt before Götterdammerung hit Reykjavik. According to the UK Telegraph, the foreign debt of the oligarchs ($530 billion) has surpassed Russian foreign reserves.

So, what should we do for now?

That's actually the easy part even though it may not feel like it.

1. If you're retired, take a good hard look at how much money you really need for the next five to 10 years. Talk to your financial adviser and, if needed, take some risk off the table. Move what you need into cash, or such safety-first choices like the American Century Capital Preservation Fund (CPFXX). Do not own anything you would not want to have in your portfolio if the stock markets were to be shut down for a short time.

2. If you're not retired -- but are close -- and have properly diversified your money, hang in there. And remember, this is exactly why we diversified our holdings in the first place -- to get through the rough spots. It's just that this is perhaps the roughest most of us have ever seen.

3. Stick to your plan. Hopefully that includes the disciplined use of trailing stops to capture gains and minimize losses, as well as specialized inverse holdings that profit with each further decline. And don't forget options to hedge existing risks.

4. Above all else, make sure you have a plan -- as we do -- for re-engaging the markets when the coast is all clear. It may be awhile before we reach that point, but it's important to maintain your upside potential in a down market. Studies like those from Standard & Poor's show that investors can typically make up 80% or more of bear market losses within the first year of a recovery, once that recovery actually arrives.

When the train leaves the station, the one place you don't want to be is left behind on the platform.

Keith Fitz-Gerald is the Investment Director for Money Morning/The Money Map Report. For more information on Keith, read his bio here.