The market's rally has been similar to the geyser after the waterfall, said Barry James, co-manager of the five-star rated James Balanced Golden Rainbow Fund. And while it isn't yet time to "be in the bunker," it's time to start playing a little more conservatively, said James.
James said the key to investing is to first examine risk, because "it's not what you make, it's what you keep."
As such, he recommends playing the weak dollar by investing in Treasurys, gold and U.S. companies with a lot of overseas sales.
Investors should also look for high-quality stocks that post good earnings, are relatively cheap and have held up well in the market.
"This rally that we've had up to this point has been one of lower quality, junkier types of stocks," James said. "We're going to go through a shift in quality, and we think that's a good place to be right now."
In the near-term, James said sovereign bonds and GNMAs are good buys, while agency, TIPS, high-quality corporate bonds and Treasurys work better in the long term.
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James owns shares of the companies he recommended by owning shares of his fund.