Should we then simply forego the inflation-fighting potential of common stock investing? My personal answer is "No," but it is understandable that many have come to a different conclusion.

In fact, however, two categories of equity investment are still reasonably low in risk, yet carry significant upside potential. By combining them, one can protect a portfolio almost as well as having a big chunk of it in money market funds and retain much of the excellent growth potential that stocks traditionally offer.

The second relatively winning category includes stocks with comparatively low debt which are also selling for less than their per share net asset value or book value. If such stocks have debt to equity of 0.5 or below, dividend payout ratios (if they have dividends) of 0.5 or less, and a price to book value of 0.8 or less, they tend to outperform the overall domestic market by at least an extra 5% return a year. Often it is effective to sell them once up 50% or more, replacing the redeemed shares with new low price to book value bargains meeting these criteria.

Therefore, buying both together, a pairing of low price to book value stocks with safety first equities, can make good sense for the overall health of one's investments. Once a good accumulation of low risk assets has been achieved, more need not be bought or sold with each new low price to book value purchase or redemption, instead trading them only as necessary to maintain a preferred allocation. I like one-third of our equities to be in the safest "Value Line" category and so often invest half as much in such stocks as in those with low price to book value, as the latter, though having greater potential for gains in up markets, generally have less resilience when investors are net sellers.

This paired purchase method has worked well for investors' net worth through the turbulent years of a new century.

An extra plus for the hedging of stocks with other equities, in lieu of substantial holdings in bonds or money market reserves, might be dismissed as just a matter of personal style, but in fact can be substantial. A typical investor, averaging 40% in money market funds or bonds and 60% in stocks, might optimistically expect an average annual return on his or her money of around 7% or less, given the current state of things. Were that person to "make do" with liquid non-equities of only 10% of the total, putting the 30% difference into low risk stocks that balance the higher volatility of low price to book value securities, the annual return on the overall nest egg, if rebalanced periodically, could well be 10% or higher. A 3% advantage over a 40-year investing career can be huge. $10,000 invested for 40 years at 7% (if, for simplicity, in a tax-deferred account and with all redemptions, dividends, and capital gains reinvested in the account) becomes $149,750. The same initial investment at 10% becomes $453,000. Which would you prefer?