Agree with others - this is still normal variation. In fact, at least so far, it seems a lot like August 2011. I think there are three points to consider
1. If you had a well diversified (stock/bond) portfolio in 2008/9 and had just ridden it through, you would have been in great shape just a few years later.
2. There is always Marbene Faber's method of momentum trading where one moves in and out of assets periodically when the adjusted price drops below the 200SMA or, for a little less noise, when the 50SMA crosses the 200SMA. It does work, no it's not always perfect and yes, you may trigger more taxable events by doing this in a taxable account. It can whipsaw or trigger you to get in/out later than you would have desired. For fun, I do this in a very small account I have - it keeps my hands busy and away from doing anything in my "real" accounts.
3. Finally, if you are getting close to retirement or in retirement and don't think you stomach large drops in stocks, then perhaps you're too aggressively invested in equities to begin with and you might want to reconsider your asset allocation. But you have to honestly ask yourself what sort of drops from the historical record you could have stomached.
As for me: Being a relative newbie at the time, when close to the bottom in 2008/9, I panicked and sold. A couple of months later, I un-panicked and bought back in. It was still close to the bottom so I didn't fall very far behind. But I still have a loss carryover in my taxes from that event for my taxable account.
What do I do now? I have two account categories: my taxable accounts (40%) and my tax deferred accounts (60%). My desire is that when I quit w*rk, that I can live on my taxable accounts for a number of years before turning on SS and starting to withdraw from my deferred accounts. I tend to follow a glide-path. Since I'm single-digit-years away from FIRE, my taxable account is more conservatively invested than my deferred account. It's at currently around 55% equities. My deferred account is around 70% equities and I will drop over the coming years to around 50-55%. Some people go farther than that - lots of literature on glide-paths and "to" vs "through" glidepaths on the web.
