I choose my stocks carefully and invest for the long term. 20 years or more. It doesn't really concern me what they do from day to day. What matters is that the company I invest in is a solid company that will be around for a while. Such as Lockheed Martin, Wal-Mart, Microsoft, Johnson & Johnson. Maybe I will even get significant dividends from these companies over time. For my 401(k), I choose mutual funds and diversify my portfolio from fixed to aggressive based on my age. I'm 40 now so I got 60% of my 401(k) in stocks. By the time I'm 65, that ratio will be down to 35%.
I suppose if I invested in those fly-by-night dot.coms, I'd have something to worry about. Those poor fools who paid $100 a share for stocks like Yahoo!, they may never get that money back. But the typical investor who is in it for the long term like me and has picked wisely for the most part, just ride this sucker out. Five or ten years from now, you won't be kicking yourself in the pants for having locked in your losses during a moment of panic.
You do know that Johnson & Johnson is under investigation for over-stating profits don't you?
Partly true. First, there is no guarantee those companies will be around too long (most companies are long gone 80 years after their founded, even the giants and some of those are old companies). But thats academic, they'll be around probably. But if you sustain a 30% loss over a two year span and you make 10% a year after that, its a over 2 years just to break even, total of 5 years with ZERO gain. Thats just rotten. Buy and hold has been proven to work great in great markets but when the bears emerge your better off putting the money under the mattress and buying back when things get better.