Ten ways to crash proof your investments

FundAdvice.com - Ten ways to crash proof your investments: "Ten ways to crash proof your investments
Written by Paul Merriman

Everybody’s a genius in a bull market, the old saying goes. But a bear market creates fear, uncertainty and costly mistakes.

The conventional definition of a bear market is a decline in prices of 20 percent or more, lasting at least two months. Whether Wall Street is in a bear market right now depends on what is being measured. But there’s no question this market has unsettled many investors."

1. Diversify among many stocks
2. Diversify among many sectors
3. Spread to different asset classes
4. Spread amongst different geographic / market areas
5. Include some fixed income investments
6. Active risk management - switch your equity/cash balance in a bear market
7. Avoid paying unnecessary expenses - watch trading costs, mgt. fees.
8. Avoid paying unnecessary taxes - fund managers can limit your taxes, know the tax obligations before you sell. Consider tax - exempt muni bonds
9. Don’t panic - avoid following the market trends during volatility. Sell on rises, buy on dips.
10. Don’t think you can outwit the bear by avoiding all risk. Crashes happen and so do those nasty bear markets. Be patient.