Wondering Where to Put Your Money? Go Back to Basics

In a struggling economy, experts advise thinking long-term and outside the box.

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."

Invest in 'Consumer Staples,' Commodities

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."

Should we just hold onto our cash? Let's say today I see a house for sale at $100,000. I don't buy it and six months from now that house is worth only $50,000. Then purchasing power of that dollar clutched in my sweaty little hand has gone up. Oh, and forget euros or pounds. Go for the green back.

"The dollar in particular, I think, is going to do very well because everybody turns to the dollar when things get tough," Duffy said.

You could hide those dollars under your mattress, or buy government bonds. A slim return, but a dollar will always be a dollar and it will always be yours.

"If you're talking about long-term investing, that's not where I would put my money," Hobson said. "I'd put my money for the long-term in stocks, but long term is the key word there where you have years to ride out the ups and downs. The greatest investor of all time is Warren Buffett, he also happens to be the wealthiest man in the United States. Warren Buffet is not liquidating his stock portfolio. That should tell us a lot."

So if you're an average person, with a job, a mortgage, a family and a little bit of money in the bank, what should you do with it? Geoff Anandappa of Stanley Gibbons Ltd., a London-based collectibles and investment company, suggests investing in rare stamps, what he calls a "blue-chip investment."

For 50 years the value of rare stamps has risen by at least 9 percent a year, driven by investors' interest and the passion of collectors. Anandappa doesn't see that growth slowing down now.

"On the contrary," he said. "I think it's going to increase because at times when the stock markets are volatile, property is a bit shaky, people put their money into hard assets."

Anandappa is so confident, he will guarantee, in writing, a 25 percent increase on your investment over five years. He also sells autographs and is similarly bullish, especially if the famous person in question has passed away.

"You know there's never going to be any more," he explained.

So, Abraham Lincoln: $25,000. Jessica Alba: $80.

Fine Wine and Farm Animals

If you want something that might age better than a starlet, try fine wine.

"[High-end wine] will always have a value," said Paula Golding of Premier Cru, Fine Wine Investments. "We have never known a high-end bottle of Bordeaux to be worth nothing."

Prices aren't rising as spectacularly as they once did but, apparently, they're holding steady because people are still buying. Why?

"At the end of the day, whatever happens on the market, they're not left with just a piece of paper in their hand," Golding said.

Now, we couldn't do a story about investments without mentioning property. Most people would say stay well clear of it. Average house prices in the United States were down, according to the best estimates, by 16 percent in the past year alone. But, in what they call the "ultra prime market" -- the very top end -- there is still demand and there is still buoyancy. So, don't invest in property unless you are seriously rich already.

"Nightline" visited a $54 million mansion for sale by by the agent Savills. The agency has sold 175 mansions in the $10 million+ bracket so far this year in London alone.

If a $54 million mansion is too rich for you, there's always the Alpaca, a symbol of wealth in ancient Peru and a niche investment in today's America.

A top notch female might cost you $40,000. But they live for 25 years, grow valuable wool and have lots of babies you can sell.

One thing that everyone advises when investing is diversify. Don't put all your eggs in just one basket. And the one thing we now know is that any investment, at its heart, is still a gamble.