Protecting your nest egg in a recession
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I think the area you want to avoid right now is financials. By and large I think the subprime issues and how deeply involved were the banks in loaning to hedge funds -- those are things that are kind of unknowns at this point in time.

I think you also want to avoid the small-cap stocks now.

They tend to perform best in the early part of a bull market and they perform the worst in the latter part of the bull market, and what we have seen lately is that small caps have begun to lag pretty significantly behind large.

And large caps will typically perform best at the latter part of the bull market.

In his own words: Alan B. Lancz

Alan Lancz is president of Alan B. Lancz and Associates, a money management firm in Toledo, Ohio. Lancz says one of the key factors in a successful portfolio in any type of economy is managing risk. He has also has taken the unusual step of fully disclosing to his clients, on a real-time basis, the holdings in his personal and retirement portfolios, and his company's corporate holdings.

It's important be strategically in the right areas or sectors of the market. In May, we recommended selling the real estate investment trusts (REITs), utilities and financials. The financials comprise more than 20 percent of the S&P 500. If you look back at 2000, technology was over 20 percent, and whenever you get a sector that comprises so much of the market it's usually a concern, a red flag should go up to investors.

They've gone down quite a bit, so it's not as worrisome, but in our estimation there's too much uncertainty. We don't know if another shoe will drop as far as subprime. Usually when there's fallout that will take longer -- just like with technology, it took more than a year for the sell-off to correct all the excesses in technology -- and we kind of see that with the financials, so it's an area that we would still avoid.

Being in the right areas and, if we're looking at potentially a recession or at least an economic slowdown, being in more defensive areas is important.