Think first, adjust your investment portfolio strategy later

— -- If you hear screaming next door, it's not because your neighbors have found Mr. Smith in 47 neatly labeled pickle jars. It's because they've opened their October brokerage statement. It's not going to be pretty.

Eventually, you, too, will peek inside that ominous envelope. Once your head stops rotating, you'll want to do something. But this is a time when you should probably think for a few minutes before buying or selling. Here are a few hints for both.

The Dow Jones industrial average has plunged from an intraday high of 11,022 to an intraday low of 7774 — a swing of nearly 3,250 points. This month alone, excluding today, the Dow has lost 17.1%, putting it on track to be the worst month since October 1987.

On days when the market is behaving like a troll with a hangover, it's hard to react rationally. Your first instinct, in most cases, is hide in the basement. That's fine. Do what you need to do. But if your first instinct is to sell, consider a few points:

•There's nothing horrible about selling. In fact, if you have stock investments in a taxable account, you can get a decent tax break for selling before Dec. 31. You can use your losses — short-term or long-term — to offset any amount of gains you might have. You can then deduct $3,000 of any additional losses from your income and carry any remaining losses to the 2009 tax year.

For example, if you have $10,000 in losses and $1,500 in gains, you could use your losses to offset your gains, deduct $3,000 in losses from your income, and carry forward $5,500 in losses to the 2009 tax year.

If you wait at least 30 days, you can buy the same securities back. If you don't, you'll have a wash sale, and the IRS will disallow your tax losses.

•That said, selling is best done in tranquility. Don't do it when traders are behaving like a giant tentacle beast using the Big Board as a smorgasbord. Start by asking: When did I plan on using this money? If you were saving for a goal 10 years or more away, you just hang on. A broadly diversified mutual fund will probably recoup your losses faster than a money fund. After all, the average money market fund now yields 1.5%, iMoneyNet says. At that rate, you'll double your money in 48 years.