Banks are failing, stocks are falling and houses are hard to sell. But no matter how unsettled you feel about the economy, the least productive thing you can do is panic. Remember this: Nothing lasts forever. And right now, that’s a good thing.

The best thing you can do in the meantime is hold on tight, conserve what you can, protect what you have and realize you’re not alone. Look for opportunities, but move cautiously before you either buy or sell.

“Doing nothing is often the best action to take. If your overall asset allocation has been in line with your goals and risk tolerance, you will make it through,” said Lyle Benson, a certified financial planner with L.K. Benson and Co. in Baltimore, MD.

But when the economy seems out-of-control, investors are likely to panic. Anxious and worried of a bottomless fall, they react by trying to time the market, the National Association of Investors Corp. warns.

Some obsess about their 401(k) or other retirement plan investments, moving their money from one mutual fund or stock to another as frequently as the rules allow. Financial advisors describe that as the bane of small investors. Only 10 percent of the long-term success of a portfolio is determined by market timing, they explain. So an investor who moves money between funds too frequently can end up with less than one who creates a diversified portfolio and then leaves it alone.

Market timing is difficult, even for institutional investors. It’s better to invest like clockwork, which means using dollar cost averaging to achieve your financial goals in spite of the state of the market. That means invest in a particular company or mutual fund on a regular basis at set intervals, regardless of the current price. By investing regularly, you gradually build wealth and accumulate assets. You also reduce your risk. Since you invest continuously, you never choose the “wrong” time.

The dollar cost averaging strategy assumes that the same dollar amount is invested regularly and that the price of the shares fluctuates over time. Sometimes the price will be high, sometimes, low. The average cost per share will be the average of these fluctuations. One of the advantages is peace of mind. Dollar cost averaging eliminates the stress of market timing and allows investors to concentrate on long-term financial goals.

But not everyone has nerves of steel, especially at a time of unprecedented economic events. If you’re among them, it’s reasonable to make some modest adjustments to your portfolio. Here’s some advice from a sample of CPA financial planners associated with the American Institute of Certified Public Accountants

• Focus on your broader personal financial planning situation. What are your cash flow needs and do you have sufficient cash reserves? What rate of return do you need to achieve in order to meet your goals and how has the recent market drop possibly changed this?
• Control what you can in your situation. Can you reduce spending in any areas to put less of a burden on your investment assets? Are you able to increase your income or perhaps work a bit longer than you had planned to offset the impact of lost portfolio value?

Michael Eisenberg, CPA/PFS, Eisenberg Financial Advisors and Los Angeles member of the AICPA National CPA Financial Literacy Commission, says:

• Be careful with CDs. If your account value exceeds $100,000 and the bank fails, you may not get all the excess back. If you have more than $100,000, consider using more than one bank.
• Review all of the companies you invested in and think strongly about why you picked those companies. If the shares were $40 and are now $20 you may want to hold onto them and ride it out, if the firm has a strong business plan and the fundamentals are sound. You may even want to consider purchasing more shares at the “discounted” rate.

Brent Lipschultz, CPA/PFS, JD, LLM, principal, Eisner, LLP, N.Y., N.Y. and member of the AICPA Personal Financial Planning Executive Committee, advises:

• Review overall asset allocation to make certain you are not overexposed to particular market segments. For example, if you hold mutual funds, make certain that the top holdings do not overlap. Many funds have significant exposure to the financial services sector.
• Review life insurance coverage and pay particular attention to those companies that have strong balance sheets. Be careful not to surrender a policy, as securing new coverage will require underwriting.
• Cash values in separate account products are generally given full protection from general creditors under state insurance laws. Equity index policies are considered General Account products for this purpose.

Alan Rothstein, CPA/PFS, Asset Strategies Inc., Avon, Conn., advises:

• The limit on the amount protected in one or more retirement accounts is $250,000. Remember, however, that FDIC insurance applies only to deposit accounts, not to any securities held in an IRA or other retirement account.
• You cannot increase your protection by simply opening more than one account in your name at the same bank, for example, splitting the money between a checking and a savings account, or opening accounts at different branches of the same bank. However, deposits that represent different categories of ownership may be independently insured. For example, a joint account qualifies for up to $100,000 of coverage for each person named as a joint owner of the account.
• Most brokerage accounts are protected by the Securities Investor Protections Corp. SIPC limits are $500,000 for securities, of which, $100,000 can be cash. Many brokerages carry additional private insurance to extend coverage beyond SIPC limits.

Ted Sarenski, CPA/PFS, CFP, DB&B Financial Services, LLC, Syracuse, N.Y., says:

• Your local bank is probably safer than a national bank, as it most likely did not get into subprime loans.
• Regional medium-sized banks are the riskiest because they don’t have access to the Federal Reserve.
• People didn’t consider the risks of fixed income securities. The only fixed-income vehicle that doesn’t have risk is a Treasury bill.

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