Dear Reader: If only there were a simple yes or no answer to this question, we'd all feel a lot better. I must admit that I, too, get queasy when the markets are so unsettled. It's just human nature to react. But I tell myself to hold steady and stay true to my long-term plan, because in times of dramatic market volatility, emotions can push you down the wrong path. Rather you need to take a dispassionate look at where you are financially, and make your decision based on your own goals and timetable — not on where the Dow Jones or Standard and Poor's are at the moment. I know that's not easy, but here are some things that may help.

THINK LONG-TERM

With stock investing, take a long-term view. Not reacting to short-term market conditions, still offers the best potential for gain. Think of what we've all lived through in the last 10-plus years — the tech bubble in 2000, the market collapse of 2008 and the more recent aftermath of the debt crisis and S and P downgrade. While each situation like this seems disastrous, reacting by getting out of the market means you risk buying high and selling low —a classic (and not uncommon) mistake.

LOOK CLOSELY AT YOUR INVESTMENTS

Just because the market as a whole goes down, doesn't mean all your investments will follow. Although diversification cannot eliminate the risk of investment losses, having a diversified portfolio with a broad range of stocks from different industries and countries can help you weather volatility with less stress.

However, if you have too many stocks in one area, consider trimming those back. (That's something you should do no matter what market conditions are.) As a general guideline, put no more than about 10 percent of your money in any one stock. And it almost goes without saying that you should look at the quality of your investments. Use an online rating tool for individual stocks. Check Morningstar ratings for mutual funds — while keeping in mind, of course, that past performance is no guarantee of future results. Then weed out any weaker holdings.

TAKE YOUR RISK TEMPERATURE

This may be most important of all. Stocks are inherently risky, so you need to carefully evaluate two things: your tolerance for risk and your capacity to take on risk.

The ability to endure market ups and downs defines your risk tolerance, which in turn should determine how you divide your investments between stocks, bonds and cash. It's easy to think you can handle more risk when times are good. But if you're heavily into stocks and losing sleep with every downturn, you need to reassess just how much risk you're really willing to take and adjust your portfolio accordingly.

Also, just because you can handle more risk doesn't necessarily mean you should. An important consideration is how soon you'll need your money. For instance, if you're close to or in retirement, you probably don't want to risk significant investment losses — even if you have a good stomach for market volatility. Ditto if you're saving for a child who is off to college in a couple of years.

CONSIDER THE COST OF CASH

It's natural to want to get out of the market during difficult times, but think about where you can put your money until things smooth out. While every portfolio should include some cash investments to provide balance, with large cash allocations you may actually be losing money. Right now, yields on money funds and CDs are near zero. If you take inflation into account — even our current low rate of inflation — the real yield is negative. My general advice is to keep your cash holdings in line with where you are in life. If you're working, have at least enough cash on hand to cover three-to-six months living expenses. If you're retired, keep enough to cover your expenses for a year, possibly two or three.

TRY TO KEEP EMOTION OUT OF IT

This is probably the hardest to do. When things are up, we naturally want to jump in. When things are down, we're tempted to sell. But you can't time the market. And if you get out at a low, you'll likely take a loss — and just as likely miss the next upswing. The best approach is to keep a level head, evaluate whether your portfolio reflects your feelings about risk and long-term goals, and make any adjustments from those two perspectives. Talking to a trusted advisor can also help you keep your cool.

Being properly diversified and knowing that my portfolio reflects the amount of risk that's right for me has certainly helped me feel more comfortable about the roller coaster ride we've been on. So my advice is to stay true to yourself, and chances are your decision to stay in the market—or not—will be the right one for you.

Carrie Schwab-Pomerantz, CERTIFIED FINANCIAL PLANNER(tm), is president of Charles Schwab Foundation and author of "It Pays to Talk." You can e-mail Carrie at askcarrie@schwab.com. This column is no substitute for an individualized recommendation, tax, legal or personalized investment advice. To find out more about Carrie Schwab-Pomerantz and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com.

COPYRIGHT 2011 CHARLES SCHWAB & CO., INC. MEMBER SIPC