In the wake of the unprecedented financial crisis, even ultra-safe money market funds have come under pressure and flirted with losses. The necessity for the government to step in and guarantee the safety of these investments underscores just how far the turmoil has spread.

Still, that doesn't mean you should start stuffing money under your mattress. Despite the financial chaos, there are still ways to stay ahead of the market.

First things first
It's not sexy, but especially during uncertain economic times like these, one of your first priorities should be to have a safety net of readily available cash. Experts recommend having six months' worth of living expenses to cover your family in the unfortunate event of a job loss or serious illness.

Despite their recent flirtation with loss, money-market funds are still the best place for money you may need at any time -- and with the government backing them, you can feel sure that your savings won't disappear.

Tiptoe around financials
Right now, just about everything has been beaten down by the market, but that doesn't necessarily mean everything is a good buy -- even if Warren Buffett has bought it.

Buffett recently announced that he would invest $5 billion in Goldman Sachs. Sure, it was psychologically important to the market to get such a vote of confidence from the Oracle of Omaha, but it's not clear how much more damage the crisis will inflict on our banking system.

Buffett also owns other financial stocks, and he's in good company -- legendary investor Ken Heebner has recently begun buying financials again, including Citigroup (NYSE:C), Charles Schwab (NASDAQ:SCHW), and Brazilian firm Banco Bradseco SA (NYSE:BBD). There definitely are bargains out there, but I still think there may be further difficulties ahead for the financial sector, so tread lightly here.

If you're not willing to wade into treacherous financial waters, intrepid investors might want to consider picking through the pile of stocks that have gotten battered over the past year, despite being far away from the meltdown.

Target (NYSE:TGT), for example, is down roughly 33% over the past year. It now sports a price-to-earnings ratio of less than 11, significantly less than the broader market. If you're looking for stocks that are especially well-suited to survive a recessionary environment, consider picking up some consumer-staples names like Philip Morris International (NYSE:PM) or Kraft Foods (NYSE:KFT).

Case closed
But one of the sweetest sources of bargains in the current market may be closed-end funds. These vehicles are known for their high dividend payouts, and they can more easily invest in less liquid securities than traditional mutual funds can, making them an excellent diversification tool.

Because these funds have a set number of shares and are bought and sold on an exchange, their share price fluctuates, based on the forces of supply and demand. Their relative expensiveness is judged based on their net asset value (NAV) and whether they're selling at a premium or a discount to that NAV.

Closed-end funds have seen their prices plummet recently, and many funds are now selling at record discounts to NAV. Just a few weeks ago, the average discount in the closed-end fund industry stood at 17%. That's like getting $100 worth of assets for just $83! Many industry insiders say they've never seen fund discounts at levels like this -- and certainly not for this long. Average discounts have fallen somewhat in recent weeks, but there are still a plethora of closed-end funds out there selling at large discounts.

If you want to get in on this asset sale, consider picking up a few discounted closed-end funds like Central Securities (AMEX:CET), Royce Focus Trust (FUND), or General American Investors (GAM). All of these funds are trading at a substantial discount to their NAV, and each features a terrific long-term track record and a seasoned management team -- all key criteria.

The Foolish bottom line
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This article was originally published on Oct. 9, 2008. It has been updated.

Amanda Kish heads up the Fool's Champion Funds investment service. At the time of publication, she did not own any of the companies mentioned herein. Charles Schwab is a Motley Fool Stock Advisor recommendation. Kraft is an Income Investor choice. The Fool has a disclosure policy.