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Investment Safety Strategies: Eight Ways to Survive a Stock Market Crash

After a barrage of bad news -- a disappointing move by the U.S. Federal Reserve and a couple of really bad days for the world's key stock markets last week -- it would be understandable if you wanted to dump all your investments, stick the cash in a duffel bag, and move to the hills.

As an investor, that would be the biggest mistake you could make, says Money Morning Chief Investment Strategist Keith Fitz-Gerald.

Although Fitz-Gerald is anticipating the whipsaw volatility to continue - and believes U.S. stocks are in for a particularly tough stretch - he's telling investors to stay invested if they can, stick with a solid game plan, and look for opportunities as they develop.

In fact, there are eight "mini-strategies" that investors can take that will let them navigate this near-term volatility, survive even a deep market downturn, and remain in the hunt for wealth-building, long-term investment profits.

"The key is remaining flexible and focused," notes Fitz-Gerald. "R emember, even the strongest trees bend in the wind."

A Hint of What's to Come

U.S. stocks started to skid in earnest Wednesday afternoon, after U.S. Federal Reserve policymakers announced an "Operation Twist" economic-stimulus strategy. The strategy wasn't well-received by investors, and the central bank may have exacerbated investor angst on a worldwide scale by stating that it was worried about global growth.

On Wednesday and Thursday the Dow Jones Industrial Average lost 675 points, to 10,733.83, a 5.91% drop. The Standard & Poor's 500 index fell 72.43 points, to 1,129.56, a 6.03% drop.

Last week's skid was just the latest episode in an erratic market that has seen the Dow zig-zag to a 16.21% loss from its peak of 12,810.54 on April 29. The sell-off spilled over into markets in Asia and Europe, and Fitz-Gerald says the pain is far from over.

He believes that key U.S. stock indices will re-test their lows of March 2009. If you've blotted those details out as a bad dream, we're talking about a stock-market bottom of 6,547.05 for the Dow and 676.53 for the S&P 500.

That put the Dow 7,617 points below its all-time high of 14,164 reached in October 2007 - a 53.78% drop. And the S&P's 56.8% decline knocked the index down 889 points from 1,565.15.

The Safety Strategies to Embrace Now

Worries about a decline of that magnitude could make the market sidelines seem like alluring real estate. Instead of cashing out, though, Fitz-Gerald says investors should follow these eight guidelines, while keeping an eye on their long-term investment goals.

Investors should:

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