It seems you cannot read the news without hearing more bad news about the stock market and US economy. The dollar is reaching all time lows daily, the real estate market has no signs of near-term hope, oil is nearing $100 a barrel, the stock market is questionable, financial institutions are hitting 52-week lows, and health care costs are rising. What’s not to fear?

The stock market has been on a tear since 2002, and experts believe we may be due for a market correction. Statistics tell us that the market rises and falls, and corrections are to be expected. And, if we happen to be entering a recession, your portfolio can experience major losses. Luckily, you can protect your downside risk from the market selling-off stocks and experiencing a correction.

Here’s what money managers recommend:

Use volatility to your advantage: One day the market advances, the next day it sells-off to drive stock prices down. That means there are opportunities to sell stocks in strength (or during advances) and purchase them during weakness. Fear in the market creates buying opportunities.

Buy on the Way Down: By continuing to regularly purchase shares of stock you purchased at a higher price, dollar-cost-averaging will minimize your losses, as you purchase more quantities of shares at a discount when they hit bottom. For example, you purchase $300 of MSFT at $35 a share, and later your $300 is able to buy 14 shares as it falls to $25. This protects your downside and increases your ability to profit when the stock rebounds.

Ignore the Day-to-Day: If you are a long term investor, keep a pulse on the trends on a weekly basis, but resist letting the day-to-day news and activity create panic.

Keep Cash on the Sidelines: Keep some cash on hand in fixed income holdings and watch for 3-5 days of 2% decreases, at which point you can consider injecting your cash into the market.

Double Check Your Portfolio: Asset allocation is most important during sell-offs. Now is a good time to double check that you are well diversified in different industries and groups. Own the big, blue-chip, no-debt, cash-cow companies that pay dividends, which will have the most resistance to a market decline.

Check the P/E Ratios: Stocks with high price-to-earning ratios, relative to their peers or similar companies, will experience the greatest declines. Invest in stocks with reasonable or low P/E rations compared to other stocks in the same category.

Cushion Your Downside with Bonds: Keep some of your money in government bonds and bond mutual funds to limit your downside risk.

Take a Look in the Mirror: Remind yourself what your goals are (growth or income), your time frame (6 months or 10 years), and your risk tolerance.

When investor confidence is high from bull runs, protecting yourself from losses can easily be forgotten. The future is uncertain, and wise investors remember when considering their earning potential to always keep in mind their downside risk. Luckily, even during times of turmoil being smart with your asset allocations and market timing can help you avoid the brunt of market declines.

Ben Bernanke, Chairman of the Federal Reserve, announces another interest rate cut . . . Wall Street rallies and Americans cheer. But how does a cut in interest rates really affect Americans anyway?

For savers, who like guaranteed returns from high-yield savings accounts, money markets and CDs, the Federal interest rate cut is not particularly good news. When the Federal Reserve “cuts rates,” they are lowering the short-term interest rate for borrowing money from the Federal Reserve. This directly impacts the interest rates paid by borrowers and businesses.

Banks often look to borrowing your cash as a way to bring in funds, particularly in this rocky credit environment. When your money is most attractive, they can typically pay you an attractive 5% or more on your money via a CD, money market fund or high-yield savings agreement. But when the Federal Reserve drops rates, it makes the Fed’s money and low interest rate an attractive alternative. As a result, the interest they are willing to pay you decreases as their borrowing options increase.

Banks will not be too quick to cut rates before their competitors, but in time you will likely see a lower yield offered on your savings. Particularly if there are more federal rate cuts on the horizon.

So, where do you go now to get those great, guaranteed returns? If you are locked in to a CD, you have nothing to worry about. The interest rate you are receiving on your CD will not change until your investment matures and you re-negotiate the terms on the CD. Money market funds and savings rates, however, can virtually change at the bank’s discretion.

Generally, when the Federal Reserve cuts rates, the stock market rallies as a result of:

• People taking money out of savings to seek better returns in stocks
• Businesses paying lower interest rates on loans, which improves their profits
• Businesses can now stretch their dollar and benefit from increased purchasing power

However, with constant news about the weak dollar, credit crisises at banks, sub-prime mortgage problems, soaring oil prices, a poor housing market, record foreclosure rates and a gloomy or unpredictable economic forecast, the stock market may not exactly been the best place for a short-term investor to put his/her money.

Typically, when the federal interest rate goes down, the dollar weakens and causes inflation. This, in turn, generally sends the price of gold soaring, but even gold might not be a safe play right now. With the already, pre-existing weak dollar, gold has reached new highs. Buying gold at it’s 28 year high does not make it an attractive entry point.

So, where does that leave you? If you act fast, you can still lock in pretty attractive rates on CDs before banks adjust their yields. Go to www.bankrate.com to search and compare your best options.

It’s stock market performance season and market timing experts are well aware that stocks should give solid returns over the next five months. Historically, the market tends to perform best between the beginning of November through the end of April. This period is when the major indexes earn almost all net gains, whereas May through October tends to be a flat, or sideways, performing market. Secondly, we have more historical data that shows that pre-election years are very strong opportunities for making money in the stock market. The year immediately prior to a presidential election has been the best performing year historically in the stock market. Stocks will continue to do well through the first year of the presidential election, and worst during the two years following the election.

If you are trying to make money by market timing, these two seasonal indicators tell us to buy stocks now. The combination of the November through April stock performance season and being in a pre-election year are strong indicators for tremendous stock growth. Be sure to consult a financial advisor before making any major decisions. The stock market has also recently been on quite a bull rush and reached new highs, but has been followed by a great deal of volatility. The instability of the housing market and other economic indicators have also created discussions about the economy possibly entering a recession.