It’s times like these that test our patience as investors.

As of yesterday’s close, the TSX had dropped more than 12% since the beginning of the year. Last year’s gains were gone in a mere three weeks. The S&P 500 was down 10%, Germany and France had both fallen more than 15% and Japan was off over 20%. Nowhere to run to baby, nowhere to hide (to shamelessly steal a line from Martha and the Vandellas).

Many markets bounced back today, gaining anywhere from 2-4%, as Ben Bernanke and his crew at the U.S. Federal Reserve unexpectedly slashed interest rates by 0.75% and the Bank of Canada cut our key rate by 0.25%.

What’s going on out there? To be sure, these are not normal times. The widespread decline is an indication that stocks are being dumped en masse. Fear is driving the markets and novice investors have become nauseous. Seasoned fund managers, on the other hand, are shopping for bargains as pullbacks of this extent over such a short period of time are rare.

What’s a rational investor to do? You’ve heard it before, but it’s worth repeating. In times like these, it’s best to sit back, tune out the short-term noise and ride out the volatility. If you’ve got some cash on the sideline, maybe it’s time to put it to work. Stocks are on sale. In any event, think carefully before you act. Ben Graham said it best: The investor’s chief problem – and even his worst enemy – is likely to be himself.