Heartbeat Monitors

Unfortunately, said planners and strategists, investors tend to act too hastily even though history has shown that patience is a virtue in matters of money. The better approach to your stock portfolio is to come up with a long-term strategy, Cheng and other planners said, for if you keep a stock long enough, you should be able to survive the ups and downs. "What's important is not trying to time the market but the amount of time you're in the market," Cheng said.

Bill Stone, chief investment strategist of PNC Wealth Management for PNC Institutional Investment Group, said keeping your money in stocks is not necessarily a bad thing, even during a recession.

Most people would assume that investors lost outrageous amounts of money in past recessions, but that wasn't necessarily the case, Stone said. According to a PNC analysis, the Standard & Poor's 500-stock index had an average 0.41 percent decline during the past six recessions, as defined by the National Bureau of Economic Research, since 1969. If you factor in the 1960-61 recession, with its 16.68 percent return, you end up with a 2.03 percent average gain. Either way, Stone said, "at the end of the day, if you invested throughout it, you came out okay."

David A. Ballard, president of Champion Financial Planning Group in Annapolis, analyzed annualized returns of the S&P 500 for every decade since the 1940s. If you held on to an investment through the 1950s, for example, you would have had a 19.35 percent annualized return. If you had held on through the 1970s, you would have had an annualized return of 5.86 percent. So far this decade, Ballard said, there has been a 2.69 percent annualized return. "The market has rebounded and has always shown resiliency over the longer term," he said.

That said, many strategists and planners say completely ignoring the slowdown is not a smart thing to do, either. If your portfolio was not tailored for a slow-growth period, now might be the time to make some defensive moves. First and foremost, make sure your portfolio is diversified. "I would worry if I had all my eggs in one basket," Stone said.

Mark Kiesel, an executive vice president at Pimco Bonds, recommends reducing your stocks by about 10 percent and shifting money to less-risky bonds. As for the stocks you do have, make sure they are not tied to the economic cycle in sectors that are heavily dependent on credit or are housing-related, he and other strategists said.

The two sectors that have already underperformed this year, according to the S&P 500, are -- not surprisingly -- financials, which include banks and insurance companies, and consumer discretionary stocks, which include automobile manufacturers, restaurants, home furnishings, and department stores, among others.

Yared said retail's performance is particularly hard to predict because of uncertainty about consumer spending. High-end retail will probably take a hit as consumers, many bogged down with mortgages they can no longer afford because they had adjustable rates, opt for bargain stores such as Target, he said. "Until Americans have a comfortable feeling on mortgages and home-equity lines of credit, bargain shopping is going to be more the norm in 2008 than the exception," he said.

Some sectors perform better than others in a recession. Sam Stovall, chief investment strategist for Standard & Poor's, examined the performance of each of the S&P 500's 10 sectors during 10 recessions since 1945. In a report he released last week, he found that on average, all of them posted a decline. Not surprisingly, the traditionally defensive sectors -- which include goods or services that people typically cannot, or refuse to, do without -- suffered the least. Consumer staples, such as food and soft drinks, were down 2.4 percent but beat the overall market 90 percent of the time. Health care had an average decline of 7.3 percent but outperformed 80 percent of the time. And utilities dropped 15 percent but outperformed 90 percent of the time.

All three of those sectors are favored by strategists and planners these days. Another sector getting high marks is energy.

Investing in companies that have strong overseas sales has also become attractive because of the growth in foreign economies and stock markets. Such companies benefit from the weak dollar, which makes their products cheaper overseas, analysts said. Emerging markets continue to be a favorite among planners.

Technology stocks, though having taken a bit of a beating this fall, also tend to withstand downturns, partly because the companies have such a global presence, analysts said. Ditto for large-cap stocks.

Some strategists, such as Kiesel, are already anticipating future buying opportunities. Kiesel envisions a scenario in which financials will become desirable again. Weak corporate earnings, he said, would probably cause a rise in unemployment, which would force the Federal Reserve to lower rates. That, in turn, would be profitable for banks because they tend to borrow short-term at the discount rate and lend long-term at a higher rate.

"Financials will ultimately benefit from this," he said.

Ultimately is the operative word. Whether the country falls into recession, a significant decline in economic activity that lasts more than a few months, is a matter of intense debate. But most analysts agree that the instability won't end anytime soon.

This downturn bears some similarities to past periods of slow growth or recession. A dramatic spike in energy prices helped spark the 1974-75 recession. The 1990-91 recession was caused by the savings and loans collapse, which resembles the deterioration of the mortgage market. Usually, an uptick in consumer spending pulled the economy out of recession, said Yared.

But this time, he said, too many circumstances are out of anyone's control. A wave of foreclosures could occur. Banking institutions will continue to write off bad loans. And a bloated housing inventory will have to be worked out. There is no way to predict how long any of that will take.

"The real pain in the neck about this is that you're watching the pain, you're feeling the pain," Yared said, " but you really can't medicate the pain."