How stay cool when the DOW drops

Two Thursdays ago, news of the Dow Jones industrial average's wild plunge of nearly 1,000 points for a few minutes interrupted people's afternoons.

As market experts continue to unravel the reasons, now might be a good time to give thought to how to react when an unforeseen market development wreaks havoc with people's nerves and sense of financial well-being.

What's most important is to refrain from acting on gut instinct, says Michael Kresh, a certified financial planner and president of M.D. Kresh Financial Services in Islandia. His advice for the bread-and-butter investor: "Never, ever get in front of a freight train," which is how he sums up the market that day.

Right mix. If, based on your goals and stage in life, your investment portfolio is balanced properly among stocks, bonds and more liquid assets, Kresh says to sit tight and weather the turmoil. Indeed, we all could do with a little of the Zen mind-set during such times.

Buy. If you have a mutual fund portfolio that is light in stock, such a day could be good for making purchases, but only if you already have funds in mind. Indeed, Kresh said, a couple of his clients called that day to buy funds they had already discussed. A day like that Thursday's flash crash, says Kresh, is not the time to start researching from scratch.

Basics. While that nearly 1,000-point nose-dive was dramatic, he says, a far more significant number was released shortly after: the 290,000 new jobs created in April, marking the fourth consecutive month of job growth. Focus on that type of data, Kresh says, which points to possible longer-term shifts in the economy, not the machinations of the market, sensational though they may be.