IT'S NOT your imagination. The stock market really does jump up and down a lot more than it used to, especially within a single trading day. On one April morning, for example, the Dow Jones industrial average rose 300 points, or 3%, in less than an hour--for no discernible reason. Even over monthly periods, volatility is greater than it was five years ago, although it's only slightly above its historical average.

A number of trends are to blame: the rapid flow of information, the effect of technology on trading, and the "democratization" of the markets that has given individual investors better access. But the prescriptions for staying calm are tried and true, says Michael Kassen, chief investment officer at Neuberger Berman.

First, don't lose sight of your time frame. "Imagine you could find out every day what you could sell your house for," says Kassen. "If you're not going to move for ten years, does it matter?"

Second, diversify. That's one of the best ways to smooth out volatility, because different asset classes perform differently over time. In addition to spreading your risk over a large number of stocks, you also need companies that aren't so closely related that one sick sector could infect your entire portfolio. And be careful not to duplicate your investments inadvertently. In the past few years, "a lot of people have owned companies like EMC and Cisco Systems" through mutual funds and individual shares, says Kassen. (See "Good Riddance," on page 40, for more on coping with volatility.)

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