All-Weather Investing

Guess what? What with the recession… the subprime crisis… foreclosures… inflation… and more, your portfolio is very likely flying into uncharted weather. And you need to make sure it does well no matter how cold or hot the wind blows. So here are five things you can do to weatherproof your portfolio.

1. Invest in companies that do fine in the good times and don’t fall apart when the economy does. You don’t have to look any further than Warren Buffett to see how it’s done.

His Berkshire Hathaway bought a utility in 2006. It bought American Express 30 years ago. It also bought a beer company and owns GEICO (insurance) and General Re (re-insurance). These types of companies provide a substantial measure of protection against a slowing economy.

2. Invest in dividend-paying companies. They don’t have to be slow-growth companies, though many of them are. Look for those that give great dividends and move up in stock price. These companies are some of the most resilient stocks around when the economy and/or the market begins to slip.

3. Invest in sectors that have peaked in the U.S. but are finding new life overseas. Tobacco is just one example where you can find surprising growth and low risk by looking beyond the U.S.

4. Keep a few of your high-upside investments (but for no more than 4 percent of your portfolio and with a 25 percent stop-loss point), even if some of them could falter in a sliding economy. Go ahead and invest in a hot retail chain, mining junior, or upcoming energy company that looks real promising.

5. Invest 10-15 percent of your portfolio in gold or silver, because this part of your portfolio really gets going when things go south.

There are no guarantees in investing. There are only possibilities. But your portfolio should be able to do well no matter what comes to pass. It only takes a little thinking ahead.

[Ed. Note: ETR’s Investment Director, Andrew Gordon, is the editor of INCOME, a monthly financial advisory service that uncovers income-generating stocks that promise safety (first and foremost), along with much-higher-than-average profit potential.]