How You Can Rebuild Your Wealth

Investments

How You Can Rebuild Your Wealth

History shows that the best way to rebuild portfolios is to stay in the stock market. Over the past nine recessions, the Standard & Poor's 500-stock index has gained 13%, on average, during the second half of a downturn and another 13% the year after it ended.

"This is likely to be one of the best buying opportunities, if not in the last decade, then in the last century," says financial planner Harold Evensky.

Strategists favor cash-rich blue chips in defensive sectors like consumer staples and health care, and technology giants. Exposure abroad also will be crucial to rebuilding wealth. Among foreign markets to watch, veteran global managers cite Japan, China, Brazil and parts of Europe outside the U.K. and Spain. (Both of these countries face their own real-estate woes.)

But it's worth keeping a portion of your portfolio in cash and bonds just in case; planners such as Mr. Evensky are keeping at least 15% in cash for their clients. For now, limit bond exposure to shorter-term, high-quality issues.

Additionally, you can ward off inflation concerns, which many economists expect will re-emerge in a year or two, by purchasing Treasury Inflation-Protected Securities, or TIPS.

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