Debt debate in Washington could hit your portfolio

CARTERVILLE, IL (KFVS) - A Heartland college finance instructor says the debt showdown in Washington, D.C. will have an effect on our nation's stock market and possibly, your money.

Associate Professor David England says while it's unlikely the U.S. will default on its debts, the nation is very likely looking at a reduction in its credit rating which he tells me will mean more hard times ahead.

"No one can predict what's going to happen, but I can say it won't be good," England said.

England says consumers will likely see interest rates in home equity loans, credit cards and car loans go up.

"We can't let that happen because many families are spread thin enough as it is," he said.

The finance instructor also says if the United States loses its triple-a bond rating due to the debt debate in Washington, it could prompt a massive sell-off of bonds in things like government pension funds and instability in the stock market.

"I guarantee the next 60-90 days will have some rocky times, but a diversified portfolio should be prepared for that," England said.

If your investments are not diversified - England says don't sell all at once, and he says investors should keep in mind that some investments do better when the market's on its way down.

"They're called inverse funds, so when the market tanks, they skyrocket," said England.

He says you may also want to consider investing in gold or silver when the prices of those metals go lower.

"In my opinion it will be safer to have a minimum of 20 percent of your portfolio in precious metals," England said. "By precious metals, I mean what you can get your hands on - bullion, coins, those types of things."

The most important thing to keep in mind: now is not the time to panic.

"Don't just go and hit the sell button because you're scared," said England. "When you do sell, sell incrementally - so you're not all in or all out."

If you've never touched your 401K to diversify your portfolio, England says it might be best to just look the other way in the coming months and hope for the best. He says now is not the time to make drastic changes to your investments because you might find yourself worse off in the end.

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