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Investing into uncertainty

By Sheyna Steiner · Bankrate.com
Friday, June 3, 2011
Posted: 3 pm ET

A few pieces of less than gratifying economic news came out this week. On the heels of Memorial Day, the Conference Board's Consumer Confidence Index showed a drop of 5.2 points to 60.8. And skittish consumers are never a good thing.

The ISM manufacturing index also fell, recording the lowest reading of the year at 53.5 percent. "Slower growth in new orders and production are the primary contributors to this month's lower PMI reading," according to the official report from the Institute for Supply Management.

The economic consulting firm High Frequency Economics attributed the declines in both indicators to fallout from high energy prices.

Of course, the nonfarm payrolls report also came out this week with an addition of only 54,000 and an increase in the unemployment rate to 9.1 percent.

With QE2 set to end at the end of this month and the nation's lawmakers making political hay with the debt ceiling and budget issues while the economy sputters, things could feel a little dicey for investors.

On Marketwatch.com a piece from Jonathan Burton, originally published one month ago -- yet still timely, tells investors the "4 big risks to your investments now."

According to the article investors need to beware of:

  • Inflation and rising interest rates.
  • Risks you can't predict: disasters, war, political and economic upheaval.
  • Risks that never go away: markets and companies.
  • Playing it too safe.

“Embark on a strategy that will preserve capital in a period of heightened volatility,” said David Rosenberg, chief economist and strategist at Toronto-based wealth-management firm Gluskin Sheff. “It’s a matter of assessing risk, of identifying opportunities and basically looking at the forest past the trees. It’s not about market timing.”

Rather than hiding from volatility, Burton recommends diversification to minimize risks. Though traditional asset classes should be well represented, gold and other precious metals are recommended in addition to alternative trading strategies such as long-short.

Some mutual funds trade in alternative strategies, making them more accessible for everyday investors. A Bankrate story coming out June 13 will go into more detail about those mutual funds.

Do you feel that your portfolio could weather any market?

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