up an average of 21% a year, while the Standard & Poor’s 500 was up just 11%. And U.S. investors have sent money overseas in droves. Aim for a healthy dose of international names in your portfolio, generally about a quarter to a third of your total stock allocation.
Buy bonds. When looking for safe havens, consider bonds rather than cash. With the Federal Reserve slashing interest rates seven times since September 2007, you could actually lose money on your cash after you factor in inflation. Bonds offer a bit more upside, says Mary Pugh, president and CEO of Seattle-based Pugh Capital Management. “From a spread standpoint corporate bonds are at some of the widest levels we’ve seen in years,” she says.
Pugh likes bonds from mortgage backers Fannie Mae and Freddie Mac, whose prices have fallen sharply in the wake of the mortgage crisis. When bond prices fall, their yields rise. She expects the bonds to realize some price appreciation in coming months. “It’s true they’ve become less liquid,” she says, “but just because they’ve had spread volatility and price depreciation, doesn’t mean they aren’t good.”
In the end, whether or not you’re currently feeling the effects of the economic slowdown, taking stock of where you stand in all aspects of your financial life can only help. Your affairs will be in better shape when the economy rebounds. And remember, it’s not all doom and gloom. Homeownership is a key foundation for building wealth, and no one’s disputing that it’s a buyers’ market.