RIDIN THE STORM OUT

    Reo Speedwagon recorded this song in 1981 and the tune is still bouncing around in my head. With the volatility that we've seen lately in the stock market, many investors are wondering where they can hide to ride out the coming storms in financial markets. The answer is that it depends on many things like: your age, your risk tolerance, where your money is located ie. IRA, 401K, your tax situation, and so on. If you are 20 years away from retirement and are still building up your retirement account in an IRA or other retirement account, you should do almost nothing. Think of the increased volatility as a chance to buy good stocks a little cheaper. I doubt that the current economic climate will affect your portfolio 20+ years from now. If you're closer to retirement, like 5 years or so, then you should be thinking of derisking your portfolio by adding safe income producing assets like Cd's to the mix. I still don't like bonds because the increasing interest rate environment will create a capital loss if a sale is necessary. Most retirement plans within 401K's have a fixed income option, it doesn't pay much but it does provide safety during market downturns. Given the current level of interest rates paid to investors for fixed income products, dividend-paying stocks with reasonable valuations are still the best choice for most investors. A dividend yield of 4-6% is available on some blue chip companies in the utility sector, communications sector and some mature tech names. For those who are already retired, income often trumps growth as an investment objective. Building a laddered CD portfolio that is FDIC insured can create income and provide peace of mind. As rates increase, maturing CD's are reinvested at higher rates. I have just completed my taxes for 2017 and am reminded what a pain the K1 tax reporting for MLP's can be. Even tax software doesn't handle this task very well. After over 10 years of doing this, I still feel incompetent. That being said, MLP's provide excellent income, sometime tax-free, and are an excellent estate planning tool. I won't go into details here but most brokers can explain how they work. Another option is REITS this stands for RealEstate Investment Trusts. They are stocks that hold realestate assets that produce income. The income is then distributed to investors at a rate established by statute. Exposure to both REITS and MLPs can be achieved through ETF's and mutual funds. Finally, market volatility gives investors a chance to buy some stocks that are currently being taken to the woodshed.and whooped like Facebook is currently. I have recently placed a limit order for FB that is much lower than the current price. I believe that a P/E ratio of 17x is reasonable for the stock after the breach of trust and the mismanagement of the scandal. The limit price is easily calculated by using the methods described in my post from 11/19/2016 "More on the P/E ratio".