There was a huge sell-off in the stock market this week, and investors are reeling. Some may be panicking. To help you better understand the dangers and opportunities ahead, Bottom Line contacted one of the country’s smartest strategists, Charles Sizemore, CFA. Here’s what he wants you to know and do…

Late-summer stock market volatility is common. But the massive sell-off this week—the Standard & Poor’s 500 stock index lost 6%, and the Dow Jones Industrial Average suffered its biggest one-day point drop in nearly four years—felt particularly unnerving. That’s because it came on the heels of several events with the potential to roil markets for months, even years. These include China’s economic slowdown and carnage on the Shanghai Exchange…a renewed plunge in oil prices…and the US Federal Reserve’s apparent determination to raise short-term interest rates for the first time since 2006.

There’s a lot of fear on Wall Street right now, and I wouldn’t be surprised if this sell-off continued a few more weeks and we had a correction in the S&P 500, defined as a drop of at least 10%. We are very close to that point already. At the same time, we’ve seen similar volatility in the past that hasn’t ended the ongoing bull market, including a correction during the European debt crisis in 2011 and a near-correction in 2012 as the Bush-era tax cuts were set to expire.

This time around, I think the stock market can also rebound. China’s GDP will stabilize because the central government has extraordinary measures at its disposal to stimulate growth. And investors will feel relief when the Federal Reserve finally does raise interest rates and it becomes apparent that the US economic expansion won’t be derailed.

What to do: Investors still need to proceed cautiously even if they share my optimism. If you have a broadly diversified long-term portfolio, stay the course, but avoid new stock purchases until the market has absorbed the news of the first interest rate hike. Even with this week’s pullback, we are still in the midst of an astonishing bull market and stocks are still overvalued in general…and I think technology large-caps like Amazon and Netflix that have performed so well this year are particularly at risk.

That being said, for more aggressive investors, there is opportunity now in two of the most beaten-down sectors of recent months—REITs (real estate investment trusts) and master limited partnerships.

Many REITs have been in freefall this year as investors priced-in fears of higher interest rates (which mean higher borrowing costs that can crimp REITs’ ability to acquire more properties and grow). But this sector will rally when investors realize that well-managed REITs will also be able to improve profits by raising their rental rates as the economy improves. My current favorite REIT shares: Realty Income Corp. (O)…and Ventas, Inc. (VTR).

Master limited partnerships (MLPs) trade like stocks, but they distribute most of their cash flow to shareholders in exchange for tax-advantaged status. These companies are typically found in the energy sector, moving and delivering natural gas and crude oil through networks of pipelines, storage facilities and tanker trucks across multiple states. MLP’s have been dragged down along with energy stocks as oil prices have started to fall again. But investors fail to realize that many MLPs have long-term guaranteed contracts with energy suppliers regardless of the price of oil. My current favorite MLP shares: Energy Transfer Equity (ETE)…and Enterprise Products Partners (EPD).

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