If you can't handle volatility, a Cowardly Portfolio helps

— -- If you're the type of person who likes to wrestle anacondas while defusing a bomb during an earthquake, this column isn't for you.

No, this column is for people so unnerved by the stock market, the European debt crisis and the Kardashians that you're utterly paralyzed.

For you — the few, the proud, the petrified — the best solution is the Cowardly Portfolio. It's a broadly diversified mix of stocks, bonds and money market funds designed to appeal to our inner chicken.

The stock market this year has been enough to unnerve anyone. The Dow Jones industrial average has fallen more than 100 points 31 times this year, enough for a month of heart attacks.

The cure for volatility is diversification into different types of investments, called "asset classes" by people who like to talk like that. The three broad investment types are stocks, bonds and money market securities, or cash.

First, a word of warning: Nobody gets rich being broadly diversified. People who make fabulous sums in the stock market do it by making big bets, and "bets" is the correct term. Yes, you could have made a bundle investing in Apple 10 years ago. But you could have lost a ton of money in Fannie Mae.

On the other hand, a Cowardly Portfolio features few horrible declines and, for many people, the tradeoff is worthwhile.

Let's start with the meekest part of the portfolio: 20% in cash. Cash is a great cushion against stock declines — and, if you start feeling braver, it's a reservoir of buying power.

The tradeoff, of course, is that most people use money funds for their cash position, and money funds yield an average 0.02%. You can take some consolation that your money fund yield is almost certainly going to be higher five years from now.

Take another 30% and plunk it into a bond fund. Bonds are long-term, interest-bearing IOUs, and their prices often rise when stocks fall.

True cowards will ask: Aren't bond yields insanely low now? And don't bond funds lose principal when interest rates rise? Yes and yes. You have three ways to deal with that:

•Suck it up. Bad advice for the timid, but your bond position is a hedge against stock declines. And your fund's yield will rise as interest rates do, mitigating your losses a bit.

•Consider a fund that invests in inflation-adjusted bonds. Rates usually rise when inflation does. These are still bonds, and vulnerable to rate rises, but they should at least compensate you somewhat for an increase in inflation. One good choice: Schwab U.S. TIPs ETF (ticker: SCHP), which trades daily on the stock exchanges.

•Buy individual Treasuries. If you hold a bond to maturity, you won't lose money. Simply buy two-year Treasury notes every quarter and roll them into new ones when they mature.

If you do buy a bond fund, look for one with rock-bottom expenses. You don't want to give away all your yield to the fund company. A good choice: Vanguard Intermediate-term Investment-Grade Bond fund (VFICX).

Put the remaining 50% in a stock fund. But not any stock fund: We want one that's born to be mild, and equity-income funds fit the bill. These funds look for stable, dividend-paying stocks. A list of five top low-cost equity-income funds is in the chart.

If a 50% stock position makes you quail, then lower it until your eye stops twitching, and invest in money funds or bond funds instead. Just remember that bad markets don't last forever, even though it seems like it.