You should target saving 20% of your salary from your very first paycheck. This may sound like a lot—particularly because so many people save nothing. But years of research shows that people who save at this level are much better equipped to ride the ups and downs of the economy—and life—than others. Take your annual 20% savings and invest it in a diversified investment portfolio instead of leaving it in the bank.

There are usually two main reasons you should sell. Reason 1: you will need the money within the next three years. If you need the money in the near term, you should not risk the volatility of the stock market because there is too high of a chance the market will be down when you need the money, forcing you to 'sell low.' Reason 2: you need to rebalance your portfolio because one asset class has gone up more than others. Sell some of that asset class, and use the proceeds to buy some of a different asset class that has not done as well. This is the best way to 'sell high' and 'buy low.'

Stock prices go up and down a lot because they are affected by market conditions that can range from changes in supplier or distribution costs, introducing new products or services to changes in oil prices, market stability and more.

When the market drops significantly in a short period of time, some investors become worried and some even panic. Avoid reacting to headlines or letting your emotions dictate your decisions. Remember you have long term goals in mind. Investing in a covered call strategy can also help you in mitigating risk.

Buying bonds and stocks is an example of portfolio diversification where the investor aims to have a variety of investments to mitigate risk. Typically, stocks are considered riskier investments than bonds. Bonds typically earn a lower rate of return than stocks.