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Riding Out Market Volatility
CNBC.com | October 03, 2011 | 09:51 AM EDT

The volatility of recent months may be enough to send the average investor to the sidelines, but pros are quick to remind that it's the ups and downs, not the flat lines, that make money.

"They’re there to serve you," says Pat Dorsey, director of research and strategy at Chicago-based Sanibel Captiva Trust Company. “Don’t let it scare you or force you out of stocks at the wrong time."

No one's suggesting a day-trader approach, by playing the day-to-day swings, but investors can adjust their portfolios a number of ways to deal with the worst period of volatility since the height of the financial crisis in late 2008.

Tempering portfolios with big-cap stocks in recession-resistant businesses, inverse ETFs that rise when markets fall or even preferred stocks paying high dividends can add some ballast to your portfolio, says analysts say. On the risk barometer, they run the gamut from low to high, depending on your stomach.

Take ETFs, which are well tailored to volatile environments and generally have low fees.

“There are inverse ETFs designed to go up when markets are down," says Michael Johnston, a research analyst at ETF Database in Chicago. Investors can also buy ETFs that go both long and short.

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