Slump-proof portfolio no easy task to create

A "slump-proof" investment portfolio can be a challenge.

It is what many investors demand in turbulent times, even though history indicates the stock market eventually recovers from its slumps anyway.

You should at least have a strategy in place before you hit the panic button. This process involves inclusion of defensive holdings less captive to the economy, such as beverages, health care or utilities, and exerting personal discipline.

"The time to slump-proof your portfolio is before you go into a stock, mutual fund or exchange-traded fund," said Barry Ritholtz, chief market strategist with Ritholtz Research in New York. "Ask yourself how much you're willing to let it go before you cut and run."

Put a predetermined mechanism in place with a reasonable selling price, both on the upside and the downside, Ritholtz said. For example, his firm enjoyed a strong run-up in its shares of Chipotle Mexican Grill Inc., but he said it put a sell level on them after finally deciding "enough's enough."

Rebuilding of the nation's crumbling infrastructure provides an ideal defensive strategy in a year of volatility.

The Shaw Group Inc. (SGR), an engineering and construction firm with a large number of government contracts, and Stanley Inc. (SXE), an information technology firm that will help government agencies rebuild infrastructure, are both recommended by Ritholtz.

"Beverage companies are able to pass along higher costs; we're seeing worldwide growth in aviation, and people take medications regardless of the economy," said Charles Rotblut, senior market analyst with Zacks.com in Chicago.

Since Rotblut expects a number of nonalcoholic beverage companies and their bottlers to turn in earnings growth rates of 9 percent or better for 2008, he recommends Coca-Cola Co. (KO), Coca-Cola Enterprises (CCE), Pepsico Inc. (PEP), Pepsi Bottling Group Inc. (PBG) and PepsiAmericas Inc. (PAS).

Military contractor Northrop Grumman Corp. (NOC) should prosper because of the nation's ongoing defense requirements "even if the Democrats are in the White House," Rotblut said. He expects aviation prosperity because Asia and Europe will be strong even if a U.S. slowdown occurs, yet he isn't recommending Boeing Co. (BA) because of delays with its new 787 jetliner.