What's an Investor to Do Now?

With financial markets in distress and the Dow tumbling below 10,000 for the first time in four years it's tempting to put your head in the sand -- or all your money under a mattress.

Rather than refusing to look at your statement, use this moment of fear and loathing of all things financial to your advantage:

• Review your portfolio and see if you're really diversified across all asset types and global markets, as well as cold, hard cash. Not much is working now but diversification is one thing you can control.
• Make sure your portfolio fits your time horizon. If you have 20 or more years before retirement, history suggests you will benefit from purchases made during the current market duress. (And I'm talking about long-term investing via a 401(k) or similar retirement program, not a short-term trade, which may or may not pan out in the next week.)
• Know your risk profile. If you can't stomach the drama, maybe you're really not an "aggressive investor" after all.

Such advice may seem obvious to more sophisticated market players -- many of whom were anxious to "buy the dip" this morning, at least before the open. But with emotions running high, it's worth remembering what long-term investing is really all about.

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