Check the financial headlines lately? The markets dropped over 9 percent in one day. Greece is on the brink of default. The Euro is crashing against, of all currencies, the US dollar. Goldman Sachs, the prodigal son of Wall Street sued by the SEC and with worse poll numbers than British Petroleum. Investors, still reeling from the Wall Street collapse in 2008 have to be wondering what's in the water, and perhaps more importantly, what to do?

While government regulators feverishly try to figure out what caused the huge market plunge just over a week ago (which was followed by a huge rebound last week) — did someone really hit the wrong button? —the rest of us are focused on the economic fundamentals and where the markets are likely to go.

Allow me to be a voice of reason. The steadily improving economic fundamentals seen clearly in the first quarter of the year, and which have helped fuel the market's tremendous recovery since March 2008, remain very much alive.

Despite the naysayers and the headlines, despite excruciatingly high unemployment levels, the economy is improving: retail sales, jobs, housing starts, and durable goods – most of the key economic indicators are pointing positive. Inflation remains low, despite the fears of rising costs; corporations are exceeding profitability expectations and holding record levels of cash. And even with a high unemployment rate, payroll numbers are showing a slow, but significant increase. And people are beginning to sense the change.

The upshot – just like we have in every recession in the past (and this was one of the very worst), we're working our way out of it. The investment markets – having recovered nearly 70 percent of their losses since 2007 – have reflected that. Meanwhile, nearly every recovering, growing market experiences periodic drops of 5 percent or more, just like what we've recently experienced. It's the "wall of worry" that helps keep markets somewhat rational, gives markets a chance to take a breath. No doubt that much of the recent craziness, "volatility" in financial terms, is just that breath, triggered by the current events. Not that a $1 trillion bailout of countries like Greece, Portugal, and Iceland won't impact the markets. It will, but not to the extent the recent market drop suggests, and it shouldn't be first and foremost on the minds of investors. 

So now what? Instead of running for the hills, investors need to get back to basics. Assess your risk and financial goals. Diversify. Many have been on the sidelines wallowing in less than a half percent interest in bank accounts. It's time for many to get some skin in the game.

Bond markets have been remarkably steady, with corporate yields above 5 percent. Example: a bond ETF – exchange traded fund– such as iShare's Aggregate Bond ETF (AGG, 3.8 percent yield) offers good diversified exposure to bonds, as does PIMCO's Total Return Fund (PTTRX, 5.3 percent yield). And dividends are back, with companies like Pfizer (PFE), Verizon (VZ) and other quality companies offering dividends of 4 percent or more. A solid dividend ETF, iShares Select Dividend Index (DVY, 3.5 percent) may also be a very worthy addition, along with Parnassus Equity Income Fund (PRBLX), a socially responsible fund that provides growth and a strong dividend kick. Dividend stocks and funds can offer a nice hedge against inflation, too.

Time to get back to basics. So, "take stock" of your situation. Then round out your portfolio, sit back, and let the market craziness be.

Ron Stein is a certified financial planner and  the founder of Good Harvest Financial Group located in Huntington.

Sources: Morningstar, Yahoo Finance (as of 5/18/10). Disclaimer: each investor has different needs. The information herein should not be used to direct investment decisions without assistance. No guarantees can be made or implied in the above information.