Shelter from the Storm

June 19th, 2012
in contributors

10 tips to protect investors from global uncertainty

by Guest Author Alan Haft

storm-shelterSMALLI was burned out from exhaustion, buried in the hail
Poisoned in the bushes and blown out on the trail
Hunted like a crocodile ravaged in the corn
"Come in" she said
"I'll give you shelter from the storm".

Bob Dylan, Shelter From The Storm

Here’s a morbid thought: which would you rather?  An earthquake or hurricane?

Tough choice? For me it’s not.  Having lived through both, experience tells me an earthquake happens “just like that.” No preparation, no foreshadowing, no time for anything except to hold on for dear life.

On the flip side of the coin we have the evil and nasty hurricane but at least with those things, we have some time to prepare. Endless weather reports, waiting around to see if the thing is actually going to hit and stocking up at Costco for some extra Kool Aid. Tedious, yes, but plenty of time to prepare is a good thing

Follow up:

...Kind of reminds me of the storms brewing around the world right now. The Euro going bust, rising unemployment, skyrocketing deficits, nukes in Iran and amongst other leftovers from the last bad meal, a fusebox of derivatives that might ignite any number of chain reactions no one can exactly predict.

Fun times.

As such, I figured it couldn’t hurt to share ten things you can do to in case a giant category five does actually hit.

So, in no order of priority, here’s my quick list:

1.    IN STOCKS?

“Should I be in stocks?”

I hear this one all the time.

In addressing this, the most important thing you should be asking yourself is, “how much time do I have until I need my money?”

If your answer is something to the effect of “within a few years,” then regardless of what’s happening around the world right now, the answer is “no, you shouldn’t have much exposure to them.” You should have a higher concentration in more defensive things such as cash and/or short term bonds.

Not sure what you should do? Use the Rule of 100 as a guideline (or the Rule of 120 given we’re living longer these days): subtract your age from whichever number you please and the answer is the ballpark percentage of a diversified stock portfolio you should be invested in.

Sometimes it’s as simple as that.


Speaking of stocks, you should also be asking yourself something to the effect of “what kind of stocks am I in?”

If you’re invested in the “Johnny’s Lemonade Stand Company” that was launched by skinny Johnny across the street last Saturday, needless to say, you have a far worse chance of weathering a storm as opposed to being invested in a blue chip company that’s been around a hundred years with deep pockets to weather through the bad. 

Cat Four Hurricane coming up the front porch? Would you bolt the shutters with bobby pins or steel rivets?

The answer is obvious and when it comes to stocks, your answer should be the same. In this day and age, quality reigns supreme.


My beautiful CFP Mom used to say, and still abides by this one: “cash flow minimizes the ills.”

Imagine this: your stocks get pummeled by Hurricane Deficit and while you’re holding on waiting for them to come back, they’re paying you cash along the way.

Sound good? It certainly does to me. I dig the ring to it and that’s why I like high quality stocks that send me dividends to pay for a couple of Doritos while I wait for its value to come back.

Speaking of food....


Quarter Pounder with cheese? On a very rare rushed occasion I’ll force myself to down one of these babies (and regret it). But if that’s not bad enough, given Mickey D’s NYSE:MCD) makes around half their money overseas, these days my stock portfolio might not like this little key fact as well.

Especially during these times, knowing a little about where your companies generate their revenue from is essential. After all, should France explode, you certainly don’t want to find out after the fact that your company makes all their money from selling purses to the French.


Imagine this: Best Buy (NYSE:BBY) is on fire and the cranky CEO blurts out, “big screens on sale for a hundred bucks!”

Would you head to the store? I would. And that’s why if all hell breaks loose, the markets just might be blurting out the same.

Apple (NASDAQ:AAPL) at ten bucks?  Bring it on.

At the moment the market is washing out to sea, surfs up, pal.  Stay out of the way because you’ll very likely find some great bargains sloshing around in those stormy riptides.


Feeling good about those bonds you’re in? Great. If Hurricane Iran vs Israel crashes up shore, decent chance they shouldn’t suffer as much damage as your stocks. But knowing how long your bonds are is more important than you might think.

Rule of thumb: the “longer” the bond, the more likely they’ll lose value if interest rates spike. Conversely, the shorter the bond, you should suffer less.

Confused? Don’t know what I’m talking about? I don’t blame you. This stuff can be tricky.  That’s what tip nine is for. Hang in there, embrace the anticipation because that one is coming right up.


Whether you’re invested in individuals or a fund of bonds, similar to understanding your bond’s length is the importance of knowing its credit quality.

Maybe you’re holding a bond that’s tossing off nine percent. Fantastic. Good stuff. Well done. High five. But more importantly, ask yourself “why is it throwing off that much?” Chances are the credit quality of that bond isn’t all that great.

Can anyone say “Johnny’s Lemonade Stand?”

If Hurricane Deficit flares up, remember Warren Buffet’s famous line, “Only when the tide goes out do you discover who's been swimming naked.”

Translation: the swimmers might look good from the chest up but when the tide goes out... look out. Even the most attractive of the bunch could inspire starving sharks to eat those Quarter Pounders with cheese instead.

8.    HEDGE IT

Not sure what to do? Who can blame you? Few people do, and those who say they do typically don’t know what they’re talking about.

That’s why the smart guys often hedge their bets by tossing a small amount of gold into their mix with some inverse ETFs and things called “stop losses” sometimes thrown in as well.

Might not be a bad call. Be sure to crack open a cold one and check these out.  And that’s what Tip Nine is all about...


I didn’t like school all that much, the food was terrible and the good looking girls never paid any attention to me. But no doubt, a good education is indeed important, and that’s what this one is all about.

Humbling, but the truth of the matter is that with rare exception, when it comes to your retirement, you’re very likely on your own.  For most, the days of rock solid pensions are long gone and as such, you really need to educate yourself.

And with that, congrats. If you made it this far into my piece, not only are you my hero but you at least have some interest in building your nest egg on a stronger foundation.

And last, but not least, (drum roll please), because this one is at the very top of my list....

10.    DON’T PANIC

Should markets fall, Europe implode or Uncle Sam catch fire, don’t panic. Remember: the worst of times are often followed by the best.

Educate yourself, follow the tips above, hang tough, think “quality” and congrats: during this very unpredictable time we’re in, we all just might find some Shelter From The Storm.

About the Author

alan-haft-bookFrom New York and now residing in California, Alan Haft is a nationally recognized personal financial educator and planner who makes frequent appearances in a wide range of print, radio and television media including CNBC, Fox, Money Magazine, The Wall Street Journal, BusinessWeek, USA Today, Forbes, The Los Angeles Times, Smart Money and many others.
In addition, Alan is the financial columnist for the highly prestigious American Institute of Certified Public Accountants (AIPCA), the largest association of CPAs in the country (examples here).
He is the author of three books including The Haft Of It, The 10 Most Common Mistakes People Make With Their Money (and how to avoid them) and his most recent bestseller, You Can Never Be Too Rich (John Wiley & Sons, NY).  He can be reached at

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