If you own stocks, be prepared for losses; here's how

— -- Q: I have 10% of my portfolio in stocks, and I'm nervous because that portion is down 25%. Should I sell and take a loss?

A:No one likes a bear market. Losses of 20% or much more, as we've all suffered in the bear market of 2008, are painful and scary. The fact you're feeling nervous about your losses is only natural.

But with just 10% of your portfolio in stocks, and the rest in cash and bonds I assume, you must keep things into perspective. Having 10% of a portfolio in a diversified basket of stocks is prudent, even for a conservative investor.

Even nervous investors benefit from having a small percentage of their portfolio in stocks. Not only do stocks, over time, deliver superior returns to cash and bonds, but they tend to rise when bonds fall. That gives your portfolio some shock absorbers.

Without knowing the specifics of your situation, my advice would be to relax. A 10% exposure to stocks is quite modest and prudent for even a risk-averse investor. I do have a couple of suggestions, though, that might help lower your anxiety:

•Have a rainy day fund. If you don't already have enough in money market or deposit accounts to cover day-to-day expenses for six months to a year, you should. By having a nice pile of money that's as liquid as cash, you'll be less anxious about your investments and less tempted to do something rash. Remember, cool heads prevail in investing. Having a cash cushion should help put your mind at ease.

•Ensure your stock portfolio is diversified. Your question doesn't indicate whether your 10% exposure to stocks is a single stock or several. If your stock exposure is just one stock, you should consider selling it, taking a tax loss and immediately moving the money into a diversified stock index mutual fund or exchange-traded fund (ETF). By reducing your company risk, and exposing yourself instead to the moves of the broad market, you might feel more at ease.

Matt Krantz is a financial markets reporter at USA TODAY and author of Investing Online for Dummies. He answers a different reader question every weekday in his Ask Matt column at money.usatoday.com. To submit a question, e-mail Matt at mkrantz@usatoday.com. Click here to see previous Ask Matt columns.