(FORTUNE Magazine) – No great calamities have struck the financial markets since the October crash. - Yet investors remain stricken with fear -- of recession, a dollar collapse, even of unbridled economic growth that would send inflation and interest rates spiraling. On April 14, a blip in the notoriously erratic monthly trade figures sent the Dow Jones industrials down 101 points. In the words of one veteran Wall Streeter: ''Everyone is just waiting for something to happen.'' All of which gives investors plenty of reasons to cower on the sidelines. But fear alone is as poor an investment guide as unbridled greed. The current environment warrants caution, not paralysis. Now more than ever, it is a time to review portfolios and to act. High-risk investments should be weeded; the economic outlook is too uncertain. But the proceeds should not be shunted into money market accounts whose returns barely beat the inflation rate. More rewarding opportunities can be found even in these nervous times. What follows is a guide to the principal investment markets:

-- STOCKS: After six months of anxiety, investors may be due for a lift. Confounding the Cassandras, the dollar has not tanked, the basic trend in the trade deficit is down, not up, the economy has not died, and corporate profits are sprouting nicely. Perhaps even more important, the takeover game is back in full swing (see chart at left). Mergers, in fact, have been the single most important force supporting stock prices since Black Monday. All these positive developments could set the stage for a good rally going into summer as investors' dread of another market collapse begins to abate. But don't be fooled into believing that a new bull is kicking up the dust. The stock market is still in the bear's hug. Before investors' fear of stocks abates, they will need to descry what does not yet exist: a market that is appealingly undervalued. Stocks are still slightly overvalued relative to bonds, according to studies by Goldman Sachs. Fortunately, the stock market's lingering malady has not infected the economy, which seems to be in reasonably good health. If the economy keeps growing slowly, as FORTUNE expects, it will not be the first time stocks have sounded a false recession alarm. Slow but steady economic growth would translate into a sustained earnings advance for corporations. The Institutional Brokers Estimate System, which regularly polls security analysts at more than 100 brokerage firms, reports that they expect the industrial companies making up Standard & Poor's 400-stock index to post an average 18% growth in earnings per share in 1988. That prospect should be a big help to the market in the months ahead. But enjoy those upticks while they last. The market is highly volatile these days, and bad news can quickly send prices reeling, as on April 14. Investors are gun-shy for other reasons. Even if recession fears for 1988 recede, there's always next year. Nine-tenths of the 330 investment professionals recently polled by Drexel Burnham Lambert believe a recession will hit sometime before the end of 1989. Such worries should keep an effective lid on any market rallies. A few stock market plays seem to be working. Some of the very biggest gains will continue to come from takeover stocks. Goldman Sachs estimates that in terms of dollar volume, mergers are running at more than double last year's pace, with foreign buyers providing much of the cash. Lured by the low dollar, they also operate under different accounting rules when reporting on acquisitions. This often makes it easier for them to outbid domestic suitors. Two industries that foreign buyers especially like are drugs and retailing. Warner-Lambert is just the kind of drug company an overseas acquirer might like, analysts say. They also consider such retailing stocks as Dayton Hudson and Ames Department Stores to be promising bets. Takeovers are not the only gambit, however. Investors of a less speculative bent would do better to sow their seeds in other pastures, such as smaller secondary stocks, which have handily beaten the broad market averages since October (see Portfolio Talk).

The most potent investing theme in the market today, analysts say, is the reindustrialization of America. The recent pickup in capital outlays covers everything from machine tools to high-tech computer workstations. Many of the stocks in these groups have risen sharply since the crash, but investment strategists argue against exiting prematurely. Says John Connolly of Dean Witter Reynolds: ''From 1981 to 1986, the only investing theme that investors really needed to know to make money was disinflation. Today the same kind of powerful long-term thrust is behind reindustrialization.'' Connolly believes stocks of machinery makers like Trinity Industries or Ingersoll-Rand will stamp out big investor gains for years to come. He also likes Caterpillar, even though the stock has already performed like a star. ''If you want a big capital equipment stock,'' Connolly says, ''you just can't ignore this company. It's among the biggest in the capital equipment group.'' Though not yet as popular as the machinery companies, computer manufacturers should be gaining more favor in the months ahead. Computer orders are on the rise. But not all technology stocks will benefit, so choose carefully. Two that look good: IBM, whose strong, 16% profit gain in the first quarter has big investors cheering the stock again, and Hewlett-Packard, whose long- awaited Spectrum series of computers should put new life into profits. Many analysts are even more sanguine about the outlook for second-tier technology companies. Marshall Acuff, chief strategist at Smith Barney, likes Xicor, a semiconductor manufacturer, and XL/Datacomp, which sells, leases, and services computers. Which stocks to sell? Profits are soaring in the chemical and paper industries, and earnings of these and other makers of basic materials are expected to climb nearly 24% in 1988. But after that, analysts say, profits could crest. In anticipation, investors may start to pull their money out. Says Acuff: ''As an investment theme, the basic industry stocks have clearly faded.''

-- BONDS: Will inflation come out of its wolf's lair and ravage bond portfolios? Not likely. Prices of many industrial commodities have spiraled up, but don't be too alarmed. Barring a collapse in the dollar, wobbly oil prices and a vigilant Federal Reserve will limit inflation's damage in the months ahead. In that environment, don't count on bonds for capital gains, but don't worry about horrific losses either. For most investors, 1988 will be a year in which bonds do something rather boring: provide income. Compared with recent years, when double-digit returns were almost commonplace, the 8.9% currently offered on long-term Treasuries appears skimpy. But that works out to more than 4% after inflation, a nice piece of change by historical standards. For those who don't mind a wild ride, James Kochan, chief fixed-income strategist at Merrill Lynch, recommends zero-coupon Treasuries. Under the magic spell of compound interest, an eight-year Treasury zero bought for $498 today and yielding 9% would mature to $1,000 in 1996. Because interest on zeros is automatically reinvested at a fixed rate from the year of issue, the bond's value is highly sensitive to any jiggles in the money market. Corporate bonds pay higher yields. But the recent wave of share buybacks, takeovers, and leveraged buyouts makes the corporate debt market a treacherous place to be. Over the past four years, corporate debt has ballooned at a 13.2% annual rate, nearly double the growth rate of corporate profits. If recession comes anytime in the next few years, more than a few debt-heavy companies could go under. Steer clear of bonds from industries being pawed at in the takeover game. The leverage loaded on in a takeover can turn top-quality bonds into shabby merchandise. Investors have been avoiding convertibles, which held up poorly in the crash. That wasn't because of any inherent flaw in converts; some were overvalued. No longer true. Says Allan Lyons, chief convertible strategist at Value Line: ''Convertible prices are very favorable for investors, especially if they pick the right issues.'' The right converts are those that will fly high if the underlying stock takes off, but decline only a little if the stock tumbles. Lyons's favorites: United Brands 5 1/2% due 1994 and Prime Motor Inns 6 5/8% due 2011. For taxophobes, municipal bonds continue to offer greater safety than tax shelters, plus liquidity. The yield on long-term general-obligation munis is currently about 7.8%, 88% as much as taxable Treasuries pay. The spread is wider than two years ago. But for most investors, these bonds deserve consideration ahead of Treasuries or corporates. To get the same after-tax income from a taxable bond, an investor in the top 33% tax bracket would have to find one yielding 11.6%. For the adventurous, junk bonds sport double-digit yields as high as 16%. To lessen the considerable hazards, buy junk bond mutual funds to get the protection of diversification. If you buy on your own, stick to the top of the heap -- higher-quality junks that won't vaporize if the economy dives. Robert Levine, who heads high-yield research at Kidder Peabody, likes Bally's Grand 11 1/2% of 1996 and Caesars World 13 1/2% of 1997.

-- REAL ESTATE: Bricks and mortar would seem a perfect refuge from shaky financial markets but for one troubling detail: Many sectors of real estate are in ferocious bear markets of their own. Commercial vacancy rates in many American cities are above 15%. A recent survey by the Office Network, a Houston brokerage firm, reveals that the U.S. office market is swamped with a five-year supply of unrented space. Those who hunt around can find opportunity. One bankable demographic trend | is the aging of the population, and limited partnerships that invest in retirement housing offer a way to invest in this boom. Robert Stanger, a tax shelter adviser in Shrewsbury, New Jersey, cautions that these partnerships take a while to sell out their properties. Accordingly, investors should be doubly certain that the partnership's management has a good track record. Two partnerships that Stanger rates highly are August Senior Housing Income Partners II and Jacques-Miller Healthcare Properties. Investing in stores can pay off, but pick your marts with care. By mid-1987 there were 14 square feet of retail space for every person in the U.S., according to Alex. Brown Realty Advisors. With consumers spending less, and with TV and catalogue shopping on the rise, consolidation is coming. Tom Kearns, a real estate analyst at Merrill Lynch, thinks a safe route through the maze of malls is to buy Federal Realty Investment Trust, an East Coast REIT that specializes in buying and upgrading older shopping centers. Tax reform curbed the deductions on apartments, but solid values do turn up. One apartment REIT that analysts like is United Dominion Realty, which builds and manages apartment projects in Virginia.

-- COMMODITIES: Don't expect gold to glitter in the months ahead. Inflation worries are mounting, but typically the goldbugs don't come running until it appears to be climbing toward 8%. The most bullish case for gold lately is that widespread worry about a general economic catastrophe will drive people to the metal. But the supply of gold is abundant. Many producers, in fact, have been selling whenever the price rallies. ''That's one of the things holding back gold prices,'' says Bette Raptopoulos, a precious-metals analyst at Prudential-Bache. Christopher Stewart, manager of futures research at Merrill Lynch, thinks platinum will shine in the months ahead, but not because of investor anxiety. He cites strong demand from Japanese jewelry makers. Those with the stomach for speculation should check out the hot action in grains. Corn, wheat, and soybean prices are rising rapidly. Soybeans are the big winner. A tightening supply and low plantings have pushed the price to a four-year high. Victor Lespinasse, a Dean Witter grain broker at the Chicago Board of Trade, thinks that with new soybean plantings low, anything short of ideal weather conditions this summer could lift the bean's price from $7 per bushel to as high as $10. That's enough to turn anyone into a bean counter.

BOX: What the Heck Do I Do Now?

STOCKS -- Rallies will be fleeting. But the diligent can find good pickings in capital goods, high-tech companies, and small stocks. BONDS -- Buy Treasuries, whose yields are rich. In corporates and municipals, stick with top quality. Convertibles look attractive again. REAL ESTATE -- Most sectors are plagued by overbuilding, so tread carefully. Two promising areas are retirement homes and selected REITs. COMMODITIES -- Gold may rally, but don't expect a surge unless inflation seems headed toward 8%, which seems unlikely. Soybeans are hot.

BOX: It Pays to Hang In

Stocks may have their unnerving ups and downs. But studies by Ibbotson Associates, a Chicago research firm, serve as a reminder that in the long run they do more for investors than any other type of publicly traded security. From 1926 through the end of 1987 -- after the crash -- the total return on Standard & Poor's 500-stock index, counting reinvested dividends, was 9.9% a year compounded. Long-term Treasury bonds returned only 4.3%. And the 3.5% on U.S. Treasury bills, the pinnacle of safety, was barely more than the average inflation rate over those years. The message is clear: Stick with stocks for long-term growth. How much you keep invested depends not so much on your affluence or age, but on how much money you can afford to keep tied up. With a long time horizon, you can ride out whatever near-term calamities occur and capture those longer-term rewards. On the other hand, money you expect to need within the next five years -- for tuition, a down payment on a house, or even retirement -- should not be in stocks. Better to tuck that money away in a short-term bond fund. You won't make any killings, but at least you'll have something to tap when the time comes.

CHART: NOT AVAILABLE CREDIT: SOURCE: MERGES & ACQUISITIONS CAPTION: Merger Mania Lives Investors may be skittish about stocks, but big corporate players show no qualms. Takeover activity, undiminished since the crash, is one of the few forces pushing prices upward. DESCRIPTION: Number of announced mergers and acquisitions, January 1987 through March 1988.