The 2007 Bunker Portfolio

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One of the best ways to avoid risk is to diversify your portfolio to include assets that won't rise or fall in value together. Foreign investments used to move independently of those in the U.S., providing a good counterweight.

However, the extent to which investments correlate can change over time. Signs are increasing that world economies and stocks are becoming more and more connected as it gets easier to invest across borders. In late July, credit worries in the U.S. caused markets all around the world to fall at once. "Over time, they're going to run in tandem," says Brent Little, managing partner of Texas-based Odyssey Wealth Management.

4. Commodities

The booming global economy can't seem to get enough oil, metal, and other commodities. That could keep commodity prices high even if markets fall. Commodities also should hold value even if the dollar continues to fall or inflation heats up, Kazemi says.

Until recently, commodity investing for the small investor wasn't easy. But a variety of new ETFs offer investors inexpensive ways to get commodity exposure. Advisors recommend spreading your money across various commodities.

Commodities can be very volatile and "a little goes a long way," Minerva's Porter says. He recommends PIMCO's Commodity Real Return Strategy fund (PCRAX).

5. Alternative investments

Here's where things get riskier. If you have some money to play with and don't mind paying some hefty fees, you can find a fund manager with strategies for growing your money through even the worst economic turmoil.

Hedge funds were originally created just for this purpose: to be hedges against declines in other assets, like stocks. Thus, many private equity and hedge funds consciously try to move independently of equity markets, and often they succeed.

Investors, however, will need a high net worth to invest in hedge funds. It's risky, so you don't want to put all your eggs in one basket. "Diversification in the case of hedge funds is especially important," says Kazemi, who is a consultant to the not-for-profit Chartered Alternative Investment Analyst Assn. "You don't want to invest in a single manager."

Funds of funds give well-off investors a place to invest in a broad spectrum of hedge funds. However, they often add their own fees, on top of those of the hedge funds. "You are getting a second layer of fees, but you're also getting diversification that a small investor ordinarily couldn't get," Little says.

Some mutual funds specialize in providing returns in down markets. Kipley Lytel, managing partner of Montecito Capital Management, recommends the Hussman Strategic Growth fund (HSGFX).

Again, caution is needed here. This sort of investing requires a lot of skill and research. Many hedge fund strategies exist, some much more risky than others. And bearish mutual funds will provide mediocre results in a rising market.

The bottom line? Most financial advisors recommend against market timing, i.e., trying to bet exactly when the market has hit its peak. You'll probably be wrong.

A better strategy, they say, is to keep your portfolio diversified, spread among several asset classes from the safe to the risky. Then you'll be ready for almost anything.

"If you have a properly designed portfolio," according to Cathy Pareto of Florida-based Investor Solutions, "market corrections and economic disruptions become irrelevant."

Steverman is a reporter for BusinessWeek's Investing channel.