Wondering Where to Put Your Money? Go Back to Basics

Oct. 10, 2008— -- A world that many of us don't fully understand is imploding. Billions of dollars -- billions of our dollars -- are disappearing. Amid all this chaos, what can we do to save our own skins? Some experts recommend a long-term strategy, while others advise thinking outside the box.

"My top-tip is that you stay invested in the stock market," says "Good Morning America" financial contributor Mellody Hobson. "That you don't sell into this blood-letting."

Stay in the stock market at a time like this? The Dow Jones Industrial Average tumbled again Thursday, closing down nearly 700 points. But some people are still buying, even financial stocks.

"Selectively in that space there are some tremendous buying opportunities where stocks have simply gone down in sympathy with all the sub-prime wreckage we've been hearing about," Hobson said.

But this market is no place for the bungling amateur.

"For the average person, they should be looking at stock mutual funds," Hobson said. "Give it to a professional to manage and allocate, rather than you having to think through what stock is the right stock."

If you really must go it alone, take some tips from a pro and invest in the basics.

"What effectively are called consumer staples," Nick Duffy of Savoy Asset Management said. "So, the stuff we can't live without. You need to eat. No, I'm serious. This is how you invest."

In other words, in times of trouble, put your faith in cheap food. And the world will always smoke and drink. In fact, that might be a growth sector.

"The other side of it is you're looking for what the government is going to spend on," Duffy said.

T the U.S. Defense Department will spend more than $100 billion on "procurement" this year.

"Weapons companies, I suggest, would be very resilient," Duffy said.

So put your money in alcohol, tobacco and firearms? Duffy says yes.

What about diamonds? Demand is rising and supply is static. For the year through August, prices were up 16 percent. And gold was $750 an ounce in early September. Now it's trading around $900.

"I'm not a big fan of commodities," Hobson said, "and gold especially is one of those commodities that people run to in very tough times, but as soon as things turn, the bloom is off the rose there and gold falls back down to earth pretty quickly."