It's no mystery that this year has not been the prettiest year to be investing in the stock market.  I have never seen such a fluctuation in stocks, bonds, and mutual funds.  Day to day you can never tell how much your account will go up or down; there is really no predicting.  Even if you have the best financial advisor, he still can't predict what the market will be like for you.  Though there are sexier articles that I could write about, I feel this is a necessary evil to discuss for our readers.  Let's get started.

What do you do if you are working toward financial goals and don't want to be hit hard with unrealized losses?  Let's say for example you are saving toward a down payment on a house this year (insert your financial goal here).  You don't want to be too conservative – i.e. putting all of your down payment savings into a savings or checking account – but you don't want to suffer the consequences of putting your down payment money in the stock market.  

Financial advisor and expert David Bach, author of several personal finance books, including New York Times bestseller "The Automatic Millionaire," recommends opening up a money market account. Money market accounts offer many of the same benefits as certificates of deposit with the added features of a checking account.

Technically speaking, a money market is more or less a mutual fund that attempts to keep its share price at a constant $1. Professional money managers will take the funds deposited in the money market and invest them in government t-bills, savings bonds, certificates of deposit, and other safe and conservative financial instruments. This income is then paid out to the owners of the money market.  Essentially a money market account is a high-yield checking account and does not succumb to high risks and losses. For a list of money market accounts click here. 

Another great tool that works well is to open a mutual fund that has a proven track record over the years of being fairly consistent.  You can even open up both a mutual fund and money market account at your brokerage and arrange to have a specific dollar amount, or percentage automatically debited from your checking account to these accounts.  Say you want to put $500 every two weeks split between both of these accounts, you could put 60% into the mutual fund and % 40 into the money market, for example. 

This diversification will keep you safer in a bad market.  Here are some sites for mutual funds. You may want to contact your financial advisor to discuss which mutual fund makes the most sense for your current goals and situation. 

Another great way to fend off high risk and losses in 2008 is to be sure that your mutual fund(s), Roth IRA or 401(k) is diversified.  You can ask at your benefits office, or even look online to see what exactly your portfolio is invested in.  It will show you the exact percentage invested in each category of stocks, company stock, bonds, and cash investments.  You can ask them for an asset allocation or a balanced fund.  This will buy into stocks, company stock, or bonds and cash investments to keep your retirement portfolio well balanced and at less risk. 

Another bit of advice is not to invest more than 25% of your retirement account contribution into your company's stock.  Remember Enron?  Many employees lost their nest eggs and entire retirement because they were too heavily invested in them. 

Using these simple tips I think you will see that making strides financially in investments is not impossible in 2008, though the market forecast seems unpredictable from day-to-day.  



Dan Olson writes for KSTW-TV in Seattle. All opinions expressed in this column are his.