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Keep Finances Safe With Charles Schwab's Investment Tips

STUDIO CITY (CBS) — The Dow had its worst day since 2008 on Monday, plunging 634.76 points as fear coursed through global markets.

Financial Consultant Casey Mervine, from Charles Schwab, stopped by KCAL Tuesday to address investor concerns.

Schwab's Financial Tips:

- Consider diversifying globally and into non-financial assets

The global diversification is a reasonable strategy for many investors. Holding a mix of international securities that are less correlated with the United States may provide a buffer in the event of market volatility. Exposure to non-US dollar and non-financial assets (e.g., gold) may help protect against a drop in the dollar, as well as a possible decline in the value of US dollar-denominated assets

- Consider avoiding too much exposure to bonds with longer maturities

Consider keeping the maturity in bond portfolios short to intermediate. Bonds with the longest average maturity typically are the most sensitive to changes in interest rates. Therefore, for investors worried about volatility may consider limiting exposure to bonds with maturities much longer than ten years or long-term bond funds with longer average duration.

- Consider high-quality bonds in sectors other than financials

If the ratings agencies downgrade the credit ratings of systemically important banks, the bonds, notes and preferred securities of those issuers may decline in value. Bonds with higher credit risk, including high-yield "junk" bonds, may be more volatile because the pace of economic recovery appears to be slowing, and this can have an impact on more economically exposed, credit-sensitive bonds. In addition, funds and investments that have minimum or average rating requirements may actually be driven to purchase US Treasury debt--which is still comparatively very highly rated, even at a AA+ level--and consider reducing investments in lower-rated bonds.

- For stock allocation, follow a long-term investment strategy

Volatility will likely be heightened in the days immediately following the downgrade, but we believe the longer-term impact will be muted. Stocks will likely continue to look toward the European debt crisis and economic growth expectations for their cues. Our recommended path is to hold tight through what may be a bumpy few days and maintain a diversified portfolio with equity assets allocated among all ten US sectors and international exposure, as appropriate. Stock investing is a long-term process and bumps in the road should not derail a solid plan.

For more information, visit Charles Schwab.

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