Bull and bear markets end with volatility, which is why you see 600-point stock market swings. This triggers a lot of emotional investing, even though underlying company fundamentals haven't changed all that much. You have to remember that 10% to 20% corrections are simply the price of admission for being a stock investor, and that your portfolio should always include defensive strategies for this reason. If your allocation forces you to sell in a down market, take a deep breath and look within because you've probably taken on too much risk.
If you're creating a defensive strategy, make sure you have exposure to healthcare stocks like Cigna (CI) and Aetna (AET), as well as consumer staples like Coca-Cola (KO). Also, IBM (IBM) hasn't disappointed anyone and the company pre-announced great earnings. Even so, it got caught in the downdraft. Now is a time to get this sort of solid performance at a discount.
Last updated February 06 2008: 10:16 AM ET
