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Ask a Fool: How Can I Protect Myself From a Market Correction in 2018?

Q: I'm worried that the stock market is getting too expensive and is overdue for a correction. Should I sell some of my stock portfolio and lock in the gains?

With the Dow Jones Industrial Average breaking through 25,000 for the first time recently, the almost nine-year bull market is still going strong. However, many experts are calling for a major correction in 2018.

The first important thing to realize is that no expert has a crystal ball that will tell them when a correction might take place. There were experts calling for the end of the bull market when the Dow crossed 20,000 last year, or when the S&P 500 first eclipsed its pre-crisis peak back in 2013. If you had listened and sold your stocks at those points, you would have missed out on big gains.

From a long-term perspective, it's always a good idea to own stocks. However, if you think the market may be getting a little too expensive, it could be smart to make some defensive investments : Stocks that are likely to do well if the market does drop, but also have strong growth potential if the bull market continues.

Wal-Mart Stores is one good example of a business that tends to do well in good times and bad, and also is doing a great job of incorporating e-commerce into its strategy. Healthcare conglomerate Johnson & Johnson is another case in point, with its predictable cash flow and the recession-resistant, nondiscretionary nature of its core products.

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Matthew Frankel has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Johnson & Johnson. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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