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LET PATIENCE GUIDE YOUR INVESTMENTS

For years, I've been preaching that boring is better when it comes to your investments. In fact, you may know that my investment strategy, plain and simple, is to come up with an asset allocation that you can live with and then dollar-cost average into the market on a regular, automatic basis.

Given the state of today's market, you might be thinking I've changed my tune. But, in fact, this economy has only served to validate my position. Because if, at the onset, you can't commit to staying in the market despite its ups and downs, you're treading dangerous waters.

Why? Because you run the risk of overthinking the situation and making investment decisions that not only aren't rational, but emotional as well. That's why now, more than ever, you need to dial in to your patient side.

Set it and forget it. When I saw The Gone Fishin' Portfolio, a new book by Alexander Green, I knew I had to talk to him. He's been getting a lot of press these days because the portfolio outlined in his book can be managed in just 20 minutes a year. How did he do it? The key is very careful asset allocation. Green selected a range of asset classes that move independently of one another, so even when part of the portfolio is down, another portion will likely be up. "I tried to put together a blend of assets that will all give a better return than inflation over time, but when mixed together, give you a higher degree of return with less risk," Green said.

Have a plan. It doesn't have to be hugely detailed, but you need to have a few rules in place that govern your reaction to the market. "Most people don't; they invest emotionally," Green says. "But if you're going to have investment discipline, that means sticking with your plan in good times and in bad times." If you can't sleep at night, you need to change your asset allocation, because you're clearly taking more risk than you can tolerate. I suggest you set your asset allocation to a level of risk you can handle, then decide how much your budget will allow you to save each month. Once you have a figure, whether it's $100 or $1,000, put it on autopilot and continue to invest that amount whether the market is up or down.

Recognize your goal. Why are you in the market in the first place? For most people, the end goal is a comfortable retirement, and it simply can't be reached without taking a little risk. If you forego investing and save in a standard money market account only, your money isn't going to keep up with inflation, meaning you'll actually lose money over time. Keeping up with inflation means ceding a little control.

There are, of course, circumstances when a money market is the way to go. If you're saving for a short-term goal like a down payment on a house or your children's education, you're better off keeping that cash out of the market right now. You don't want to run out of time before you can recover from a big loss.

Don't forget the basics. Save early, save often is an important rule. Risk and return aside, the amount you stash away plays a big part in the number you'll have when you hit retirement age.

Control everything else. You have no say over the stock market. But you can control how you spend your money. You can choose to keep your credit card in your desk drawer at home when you go out. You can decide to put a little extra money away each month so you have an emergency fund at the ready. Having a grasp on the rest of your financial life will help you remain calm when the market isn't.

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