Can you answer that question?  If you have to think about it then you either have WAY too much money or you need to stand up and take responsibility for your finances. Today I am going to talk about one aspect of your overall portfolio. Stocks.

Remember Pharaoh's dreams? Joseph told him there would be seven fruitful years and he would need to save up because they would be followed by seven lean years. We have just had 4 years of incredible growth in the stock market. Are the lean years upon us? How can we tell? What can we do about it? If we are asking ourselves questions like these we are off to a good start.

So now what?

Here are some of my guidelines to trading a bear market. OK OK I know we haven't established that this is a bear market but if you don't want to be prepared.......

Rule number one: 

Ultimately TRUST NO ONE.

This may be my inner most childish fears talking, but it is YOUR money. ALWAYS remember that. All decisions shall be yours and if you are uninformed they will not be good ones. Anyone who tells you what you need to do with your money ALWAYS has an ulterior motive. By all means PLEASE, LISTEN. They may actually have something good to say but get a second, a third , a fourth opinion and then double check it on your own.

Rule number two:

DON'T FIGHT THE TAPE

Stocks that act weak on strong market days need to be sold virtually immediately!!!! I cannot reiterate this enough. If you start hoping and wishing the stock will catch up to the market. Forget it. This is a recipe for disaster. The second the market starts to weaken this stock will collapse. The corollary: If a stock looks strong in a weak market it will PROBABLY go up when the market turns. Be careful though. Often the stock will sell off before it goes up and it may never go up if market sentiment doesn't change. Put it on your radar or take a small position and wait for it to act well on another day before you buy more.

Rule number three:

NOBODY EVER WENT BROKE TAKING A PROFIT. 

This rule does not apply to some of my gambler friends who are so deep in debt they can't afford to take a profit. (Just kidding). When do we take profits? If we are truly in a bear market what we will see is steady selling day to day, then, out of nowhere, snapback rallies that will look so strong that we cant believe that they won't continue for a few days. THEY WON'T. Generally they will end the next morning when trader's breathe a sigh of relief and start unloading their recently acquired positions. YOU SHOULD AS WELL. The difference? You will not be breathing a sigh of relief because you have not surpassed the sleeping level.

Which brings us to rule number four: 

STAY SMALL. Losing money and losing sleep seem to go hand in hand . If you can't sleep at night because you are worried about the stock market then get in there and sellllll, selllll, selllllll.

Rule number five:

INVEST IN INDUSTRIES YOU UNDERSTAND

If you are a doctor invest in healthcare stocks. If you are a computer geek invest in software companies. If you are an insurance agent invest in insurance companies. If you live in Las Vegas invest in casinos. Enuff said?

Rule number six:

LEARN OPTIONS STRATEGIES

Options are a way to hedge your portfolio or leverage your positions. I can recommend "Option Volatility and Pricing Strategies" by Sheldon Natenburg . This book is not easy and I would not recommend it to the casual investor

Rule number seven:

IT IS EASIER TO HAVE A PROFESSIONAL MONEY MANAGER DO THIS FOR YOU

Mutual funds are wonderful things. They allow you to diversify your positions with very little cash. You are one of many investors pooling money in order to buy a basket of stocks. PLEASE do your homework!!! Don't pick a mutual fund because your brother-in-law says it is OK . These days there are so many funds that cover a variety of investment strategies. Some helpful hints. Don't invest in a fund that has not been in business for at least 8 years. The last bear market started in 2000 and lasted through the end of 2002. If a mutual fund survived that they are probably OK. Slow and Steady wins the race. If a mutual fund has fabulous returns during the good years chances are they will not perform very well in a bad market. I want to see steady gains of 8-20 percent rather than up 45% one year and 1% the next. Once you pick your fund decide on an amount of money you want to seed it with and then add money monthly or quarterly so that you are never at the mercy of bad timing. BEWARE OF THE FEES. Lots of these mutual funds have hidden fees. Check out www.sec.gov/answers/mffees.htm to learn more.

Trust me when I tell you if you follow these simple rules you will become a better investor and if you believe that........ Let me refer you to rule number one!!!!!