Many investors are wondering whether or not they can stomach any more losses in stocks, exchange traded funds (ETFs) and other securities and just don’t know what to do with their nest eggs.

With equity indexes hitting 11-year lows, an even stronger sense of pessimism has drifted into the average investors’ mind.

On the one hand, an investor can sell everything he owns, but will probably kick himself if and when the market rebounds. On the other hand, he can continue to play the market and get through this storm that we are in. If you do decide to play the market, remember that the ever-so-popular buy-and-hold strategy is, in our humble opinion, dead. Instead, we suggest that you utilize the 200-day moving average strategy.

But remember, we are not fortune tellers and there is no guarantee that the market will not take another nose dive. There are indicators, however, that are encouraging to the bulls. Tom Petruno of The Los Angeles Times states the dropoff in the market volatility in 2009 and the fact that far fewer stocks hit 52-week lows on Feb. 23 than on Nov. 20 are two such indicators.

Ultimately, the decision on what to do with one’s nest egg is up to the individual investor. When making our choices, we all need to be mindful of our risk appetite, proximity to retirement and personal living standards. To be on the extra conservative side, we can always just stash our cash under the mattress or in a savings account, just remember to consider inflation if you do decide to do this.

One suggested coping strategy we have is easy to follow, will help stop the bleeding and helps to remove emotions from the process. If you follow this, you’re not bailing entirely on your portfolio, you’re just taking steps to protect yourself in case the market continues south:

• Sell one-third of your invested equity positions now.
• If the remaining two-thirds decline 5%, sell another third.

We might like to think we’re at or near a bottom, but the truth is, nobody knows. Have a plan for the best results.

Tags: 401(k), Retirement, Trend Following