The United States economy is currently experiencing a serious financial shake up. No one really understands just how deep or how far reaching the damage is going to be, but what we do know is that there is going to be damage, and that we are going to be at the mercy of the markets and the world economy while we try to deal with the backlash from this particularly messy financial shakeup. Here are a few really important steps that you can take when it comes to protecting your investments in times of economic crisis.

1 - Stop making rash decisions.

If you can walk away with one piece of advice, let it be this one: Turn off the television and stop watching the news reports. Government bailout plans and plunging markets may make excellent headlines, but they are not what you should be basing your trade decisions off of. It is absolutely, perfectly reasonable for you to want to keep up with the events as they unfold, but do not allow your investment decisions to be based on the latest updates from the media circus. They are trying to stir up drama, don't let it affect your portfolio.

2 - Analyze your Financial Sector Exposure

Whether you hold individual stocks, ETFs or mutual funds, you may have a lot more exposure than you are actually aware of. If you own the S&P 500 index, then you are 15 percent invested in financial firms alone for example. Even with the Federal government stepping in to provide aid, banks and financial institutions are still going to face an uphill battle in the coming months or even years. If you are holding a lot of financial stocks, then you need to make sure you understand how these companies are making their money, and what risks are available to you in today's market. If you are going to invest money in these and other financial companies, you should only choose the ones that possess strong balance sheets, some measure of transparency for peace of mind, and conservative standards for lending. Risk takers like Fannie Mae and Lehman Brothers got themselves into trouble by lending recklessly, but BB&T and Wells Fargo on the other hand are going to emerge from this crisis in a much better competitive position than ever before.

3 - Use drops in the Market to find Newer Opportunities

You can make the most out of your money in a bear market, you just do not normally realize it. The bright side of sell offs in the market is that you can actually snap up a lot of terrific investment vehicles that have been dragged down with the market. Housing prices are declining, the economy is in a tailspin and credit is tightening, but during this deflationary period you can actually make some pretty smart investment decisions that will benefit you in the long run.

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Originally posted 2008-11-19 05:49:06. Republished by Blog Post Promoter

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