Sometimes doing nothing is something

At times like this, when the stock market seems in constant danger of collapsing, the toughest thing to do is nothing.

Yet doing nothing might be the best action, especially if you have several years to ride out storms.

You don’t want to cash in your chips at what could turn out to be the bottom. To succeed with any timing strategy, you’d need to buy back in at a lower price than you bailed at – and that’s not easy.

Here are some steps to ponder that can help you feel in control without shooting your portfolio in the foot.

•Take an action, but make it a small one.

It’s hard to sit on your hands while the market is falling. Recognizing this, I have found it helpful to make small moves, buying or selling only about 1 percent of my portfolio and doing so no more than once every few weeks or couple of months, depending on market action. Making an occasional small trade can help you feel more in control without causing any significant damage to your portfolio.

In fact, small adjustments can be a wise rebalancing strategy in which you put a bit more money into stocks or mutual funds that have gotten clobbered. That implies you’d want to add money to the stock market, rather than pull it out, during big down days.

•Think about the tax impact of your moves.

If you trade frequently, it’s best to do so within 401(k) or other sheltered accounts where you don’t have to worry about taxes.

But there are times when you might want to take advantage of the tax laws by selling stocks or mutual funds in unsheltered accounts to qualify for a deduction against ordinary income. You can deduct up to $3,000 in net losses (losses exceeding your gains) each year. Losses beyond $3,000 can be taken in future years.

If you feel the urge to sell something, you might as well grab a tax break.

•Monitor your feelings, but don’t obey them.

In “Your Money and Your Brain,” author Jason Zweig suggests keeping a diary of your mood swings and portfolio progress – and reviewing those entries from time to time.

Chances are, this record will show you to be overoptimistic when stock prices and risk are rising (the two go together) and despondent when prices and risk are falling.

“So you need to train yourself to turn your investing emotions upside down,” Zweig writes.

Excitement can be a cue that it’s time to sell, he adds, while fear might suggest that it’s time to buy.

Underscoring this analysis is the concept of thinking for yourself and ignoring a herd mentality. You want to buy low and sell high, and that’s most effectively done by going against the grain.

•Run through a pre-sell checklist.

Before selling a stock or other investment, Gordon Ceresino, vice chairman of Federated Investors in Boston, suggests reviewing why you bought it in the first place, focusing on company-specific factors rather than the current investment psychology.

“Revisit the reasons you own the investment,” he said. “If they’re still in place, keep that position.”

Pat Dorsey, director of equity research for Morningstar Inc. in Chicago, suggests a similar tack. As outlined in “The Little Book that Builds Wealth,” Dorsey recommends asking four questions: Did you make a mistake with the investment? Has the investment changed for the worse? Is there a better place for your money? Has the investment become too large a part of your portfolio? If you answer yes to one or more questions, it might be time to sell. If not, he recommends staying put.

If you truly can’t stand the heat in the kitchen, get out. There’s something to be said for minimizing stress, which can damage your health and cause other problems.

But if you can tolerate some pain, try not to throw in the towel completely. Experienced investors who have been there before recognize that dips and downturns are part of the cycle, but so are rallies and rebounds.