How to Be a Better Investor in Today's Market

Use these strategies to stay cool, and even prosper, in an era of uncertainty.

There’s nothing investors hate more than uncertainty, and now it seems there’s nothing but. The chief worries are the Federal Reserve’s intentions and the potential impact that a slowdown in China will have on the rest of the world. The two combined to precipitate the U.S. stock market’s first correction since 2011, with Standard & Poor’s 500-stock index falling 12.4% from its May peak through late August.

The big question is whether the downturn remains a correction or turns into a bear market, defined as a drop of at least 20%. “We’re still treating this as a correction,” says James Stack, publisher of the InvesTech Research newsletter. But although the U.S. economic outlook remains healthy, the bull market, now more than 6½ years old, is showing its age. One warning sign: a waning number of shares advancing relative to those declining.

It’s not so much that investors have to worry about a 2008-like cataclysm, says Ben Inker, co-head of asset allocation at GMO, a Boston investment firm. The more pressing concern is that the typical investor will have a hard time beating inflation over the next five to 10 years. Says Inker: “It’s difficult to make a case that you’ll get returns close to historic averages. It’s not so much scary as it is disheartening.”

Subscribe to Kiplinger’s Personal Finance

Be a smarter, better informed investor.

Save up to 74%

Sign up for Kiplinger’s Free E-Newsletters

Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.

Profit and prosper with the best of expert advice - straight to your e-mail.

Sign up

What makes today’s environment unique is that the challenges aren’t confined to any one country or any one market. Stocks in developed foreign markets catch a cold when China sneezes, and they stumble every time a debt crunch materializes in the eurozone or a geopolitical crisis emerges anywhere. Emerging-markets stocks might tempt bargain hunters. But shares in commodity-producing countries look unattractive. At any rate, developing markets are high-risk by definition and should claim only a small part of your assets (see Emerging Markets: Not a Pretty Picture).

With interest rates likely to rise from today’s historically low levels, a bond-heavy portfolio is vulnerable to losses (bond prices and rates move in opposite directions). Supposedly safe U.S. Treasury bonds represent “a return-free risk as opposed to a risk-free return,” says Martin Sass, of M.D. Sass, a New York City investment firm.

Cash, the ultimate safe haven, pays nothing today, making it a guaranteed loser after inflation. Yields on money market funds and the like will lag the inflation rate even after the Fed starts to raise rates this year, says’s chief analyst, Greg McBride. That’s because inflation itself has to rise before the Fed will hike rates enough for savers to notice. In short, says Inker, “It’s not clear where to put money to try to make money.”

We’re here to help. In the articles at the links below, you’ll find our best ideas for how to become a better investor—one who is able to meet the challenges of today’s markets and get decent returns in stocks, bonds, cash and even alternatives, those outside-the-box strategies and investments that you might not normally consider. But they’re worth a look now, because today’s investing environment is anything but normal.

Anne Kates Smith
Executive Editor, Kiplinger's Personal Finance

Anne Kates Smith brings Wall Street to Main Street, with decades of experience covering investments and personal finance for real people trying to navigate fast-changing markets, preserve financial security or plan for the future. She oversees the magazine's investing coverage,  authors Kiplinger’s biannual stock-market outlooks and writes the "Your Mind and Your Money" column, a take on behavioral finance and how investors can get out of their own way. Smith began her journalism career as a writer and columnist for USA Today. Prior to joining Kiplinger, she was a senior editor at U.S. News & World Report and a contributing columnist for TheStreet. Smith is a graduate of St. John's College in Annapolis, Md., the third-oldest college in America.