Comfort Zone Investing: Seeking shelter from the storm ... but where?

First, get your mind right. This market may be bad for quite a while. Think very defensively. There have been times when the Dow Jones Average has been virtually flat for years at a time. So even with some good news, it may not be enough to change the psychology of investors, taking them from fear to greed. Expect the worst, hope for the best.

If you want to buy some higher yielding stocks, don't buy the ones with the highest yields. Those are the stocks that will most likely cut their dividends and soon. Very high yielding stocks are a red flag. The reason the yield is so extraordinary is that investors don't believe it can be sustained. You're much better off buying a stock that is in the middle or lower middle of the dividend spectrum for a particular industry. For example, if you're looking at real estate investment trusts and can find issues that have a yield spectrum of 4% to 14%, the chances are much better of continuing to see the dividend if you buy a stock that gives 5% or 6% rather than choosing the one that gives 14%. Odds are very much against you receiving that high return for very long.

Remember there are no safe harbors in the stock market. Any stock can get whacked, smashed by bad news about accounting or competition or management mayhem. If you really want to avoid the stress, you have to get out of the market altogether. So where should you put your money?

The first rule is to keep it liquid. Your investment funds need to be available when you feel it's time to get back into the market. Using a CD to park money ties it up for whatever period of time you've chosen. Sure, you can take it out early, but there's a penalty that has to be paid. If you get into a 9-month CD and next week the market turns because of solid, positive news, you're going to want to be in it. Taking your money out of that CD will most likely cost you. Stay in money market funds or checking accounts that pay good interest rates. Or you can simply hold the cash in your brokerage account where it will earn interest as well.

The trade-off you're willing to make is one of liquid assets instead of maximum return. You can make more money in other, less liquid investments, but that isn't your goal. You want immediate access to your funds so you can move into stocks quickly when you want, not when a CD expires or some other timed instrument matures such as a treasury bill. Right now, if you're determined to stay out of the market, stay liquid.

It's tough for investors in this market. No one escapes the pain. Investors are questioning daily whether they should even be in stocks. Maybe taking part of your money out is the answer for you. Maybe taking it all out works better. Whatever lowers your stress level is what's best for you. Don't worry about maximizing returns. Worry about worry. The less of it you do, the better for you, and the better your decisions will be. If you opt for taking some or all of your money out of the market, keep it liquid. This market will once again roar ahead. Be ready for that.