Part four of the SEMA Recession Survival Webinar Series, entitled “Protecting Your Finances in a Volatile Economy” and presented by Matthew Egan, vice president and senior financial advisor at Merrill Lynch, revealed that an effective asset allocation strategy, combined by preserving your principal, can help you outlast the current economic climate.

Egan advises listeners to maintain an asset allocation strategy that includes stocks, bonds, cash, real estate, bear market weightings, cash (CDs, money funds and FDIC insurance) and precious metals.

"[Asset allocation] continues to be the most critical way to handle your personal finances, your investments and your 401k plans," said Egan. "You need to always look at your asset allocation—the ratio between the stock exposure you have, the bond exposure, the cash, the real estate and [precious metals]."

With stocks, be on the hunt for the highest quality “survivors.” Also, pay attention to the payout ratio, mind the sectors and create an enter and exit strategy. Always administer risk management.

"The number one way to control risk: Control dollar exposure," said Egan. "Always focus on how much money you are exposing, relative to your overall portfolio. So if you have 90% of your money in one thing, you're just begging for a scary ride. Spreading your dollars over the different components is really, really important when you are asset allocating, and you have to watch the money."

Within mutual funds, Egan states that you must know what you own. Figure out where your mutual funds fit into your asset allocation. Control risk with monetary exposure, and maintain a long-term mentality.

In terms of a cash investment, Egan steers listeners away from money funds.

"Most money funds now are paying like 0.1%, 0.2%: You get a tenth, two-tenths of a percent interest—peanuts," said Egan. "It's really hard to get yield right now."

Download an audio or PDF version of the webinar here.

Don’t miss the upcoming webinar:

• "Tough Times Bring Change: Learn How to Manage and Move Forward," Thursday, April 9, 2009, 10:00 a.m.–11:00 a.m. (PDT)