The Stock Market? Small Caps?

If you believe some crazy-ass-aspects of the current economic model that is driving global markets into a nose-dive, what's to stop you from expecting the same fate for your money? What's to stop you from planning a new model for your money to ride out this tough time?

In the old days, if your money wasn't flowing, you would sit on it, and hope it would come back. Today, you can buy protection against a crash: Put it in an index fund, exchange-traded fund, or mutual fund. The beauty of these securities is that they follow the S&P 500 index and tend to track the American economy. When things get bad, and they will, you can go into a physical store and purchase index protection against more bad times. Some index funds offer a glidepath, a set of expectations for future performance that allows you to buy at and sell at a discount without fear of loss. That's helpful if you're short on cash.

So, let's look at a scenario: We'll assume the economy has taken a big downturn that has you stressed. You have been watching the Dow Jones drop over 20% in a year. And now, it's dropped almost 30% in just the last week. You've had enough and are about to break out your credit cards and blow through your emergency fund, like a maniac.

You go to the bank to take advantage of the low interest rates. Unfortunately, they won't be offering any rates for this time of year. And they have an offer for you in the newsletter. It's the worst rate they've offered in at least four years! What can you do now?

First, let's go back to the fundamentals: The current economy is still driven by consumer spending, which is down, while business investment has been down, business sales and profits are up, and the stock market is up.

Consumer confidence is at a 14 year high. Housing is up, and the housing market has been an area of strength. Gasoline prices are down, and so is the cost of food.

The energy market is showing more stability, and you know that your gas and oil prices are going to stay low for the next year.

I mentioned earlier that corporate investment has been up? That's because companies are responding to an increase in consumer confidence, and a desire to remain competitive.

So, let's take a look at what else is going on in the world of investing: The S&P 500 has been up nearly 20% over the last year. In reality, it would be closer to 25%. And now, they've introduced the energy sector into their index, which has a 40 year track record of moderate to strong growth.

And while the stock market is up, small cap stocks have been doing well. Utilities are up over 25%, and consumer staples is up nearly 30%. Technology stocks are up over 20%, and biotech and pharma is up close to 30%. And Health care stocks have been up close to 40%.

So, this means that you should continue to buy small caps stocks. Remember, you can't control the stock market. You can however, control small caps stocks.