A 5-Step Program for Investing in This Market

For investors, the market's moody swings are a recipe for rash decisions. Even the pros are having a hard time getting it right, so don't get discouraged. If you're a frazzled investor, here are five practical tips from Charles Schwab designed to calm your nerves:

1. Stick to your trading plan. Do a little soul-searching and find out why you're buying or selling right now. Emotions run high during times of extreme market uncertainty; that's why having a plan can keep you from veering off course and taking on more risk than you're comfortable with. Also, extreme market swings can throw your portfolio's allocations out of whack, so remember to bring it back to its original proportions (financial planners' advice differs here, from quarterly to annually and points in between, but rebalancing needn't happen too frequently.)

2. Trade smaller positions than usual. It's tempting to dump a lot of money into a stock market that's this cheap, but taking on a giant position in order to maximize gains is risky, says Schwab. The firm recommends old-fashioned dollar-cost averaging, in which you channel a consistent amount into your portfolio at regular intervals. That way, you don't have to worry about your money all going in when the market's up. Sure, sometimes you'll buy on an up day, but you'll also be investing during dips.

3. Consider using limit orders. Limit orders, which essentially instruct your brokerage to buy or sell a stock at a specific price, help you avoid selling at a price lower than you wanted. Therefore, using limit orders allows you to dial down market risk when big swings occur. But here's something to remember: Your limit order may never be executed because the market may quickly surpass your limit before the order can be filled, according to the SEC.

4. Consider ETFs rather than individual stocks. Exchange-traded funds, which look like mutual funds but behave like stocks, give you more diversified exposure to a particular sector or industry than betting on individual issues.

5. Sometimes the best trade is no trade. Don't think you can time the market, especially one so driven by news. Because here's the thing: It seldom works, says Schwab: "Never be afraid to admit to yourself that you simply have no idea where the markets are heading. When you're uncertain, we think sitting on the sidelines is not a bad idea."