It’s almost impossible to not to feel the fear in this market.

I know this because I feel it, too.

Personally, I’m balancing the desire to sell everything and run for the hills against the knowledge that doing so would be the worst possible statistical choice to make right now.

Which means, as it usually does when I get such conflicting emotions, is that the real issue is simply not doing something stupid.

So let’s talk about that for a minute.

Sometimes You Have to Ignore the Chatter

First, you’re probably hearing the same talk that I am about why you should stay invested … yada, yada, yada … don’t miss the upturns … blah, blah, blah.

Dismiss most of it. If you’re nervous about the markets, there’s no reason in the world you need to be fully invested. Staying invested is something Wall Street cooked up to keep its claws on your assets. Given present events, it makes all the sense in the world to put a solid portion of your money in cash — or in short-term Treasuries — as we’ve advocated for months now.

But don’t sell your holdings indiscriminately. Use trailing stops to let the market tell you how and when to make your move. Ideally, the key to the current situation is finding a way to get through this mess without sacrificing every bit of upside.

Recognize, however, that the market may “tell” you to sell everything before this is over.

When I said eight months ago, before it became de rigueur and dawned on the Ministry of Whitewash, that this was the worst financial crisis since the Great Depression, I wasn’t kidding. And I’m not kidding around now.

And here are three reasons why …

• First, despite the financial shellacking we’ve taken in recent weeks, we have still not seen the true hair-on-fire, I-want-out-at any cost panic — at least, not yet.
• Second, “hope” is not a viable investment strategy, even though many investors continue to hang onto that emotion. At the same time, “giving up” is not such a hot strategy, either, especially if you’ve done your homework and understand exactly what’s worked in past periods of market turmoil. Right now, the list of “what’s worked” includes a healthy dose of income-oriented investments, hard assets and even plain-old-vanilla balanced funds — all of which have been proven to stabilize your portfolio during turbulent times in the past.
• Third, remember that the doom doctors that seem to have all the headlines right now make headlines precisely because they’re so extreme. And don’t forget that certain trends — like the growth in Asia, energy, and inflation for example — haven’t disappeared. They’ve still got trillions of dollars behind them and are still virtually unstoppable; they’ve just been pushed from the front page in recent weeks. So prepare a shopping list and get ready. There’s a lot more value and upside than most people think — just not yet.

In the meantime, make sure that fear strikes out — and not you. Just play it smart.

Keith Fitz-Gerald is the Investment Director for Money Morning/The Money Map Report. For more information on Keith, read his bio here.