Stock market keeping you awake at night?

Unless you're a Wall Street whiz kid, you might want to stay with stock-based mutual funds. Funds, which are an aggregate of a larger number of stocks, offer more diversity and a better cushion against the ups and downs of the market. According to some financial planners, that's a better bet for the typical investor.

"Nobody should own individual stocks," says Larry Swedroe, author of "The Only Guide to a Winning Investment Strategy You'll Ever Need" and principal of St. Louis-based Buckingham Asset Management. "That's more akin to speculating than investing."

When it comes to keeping pace with the cost of living, stocks have done a better job over the long haul than other types of investments, says John Bogle, founder of Vanguard and author of "The Little Book of Common Sense Investing."

"But you should be using mutual funds," he says. "Diversification provides additional levels of safety."

This advice is not a comment on the current economy. Some financial advisors contend that individual investors with a long-term goal have always been better off holding mutual funds instead of individual shares, regardless of the market.

"I do like index funds," says Jeremy Siegel, finance professor at the Wharton School of the University of Pennsylvania and author of "Stocks for the Long Run." "I even like fundamentally weighted indexes. They tend to do better in the long run."

Those funds "are much more resistant to declines," he says. "Most people who go into individual stocks don't do as well."

Another reason funds make sense: "The vast majority of people do not have enough money to allow them to be adequately diversified in stocks," says Barbara Roper, director of investor protection for the Consumer Federation of America.

Look at the horizon
Even with funds, if the stock market is on a roller coaster, is it time to get out?

Market watchers and financial planners are virtually unanimous: absolutely not.

Definitions

• Index fund -- A fund of stocks that represent a particular index. • Load -- A load is a sales charge or commission paid to a broker or sales intermediary, not to the fund. • Risk -- The probability that the return will be less than expected. See the Guide's Glossary for a further explanation of these terms.

"If you're invested for the long term, which most people are, you need to maintain a long term perspective and ignore the short-term volatility," says Ric Edelman, RFC, and author of "The Truth About Money."

Bogle differentiates between two types of stock owners: "Speculators are more interested in the price of the stock than the value of the corporation."

His advice to them: "Get out and stay out because I don't think this is a good market to speculate in."

The other group: investors. They are "buying to accumulate wealth for the long-term."

Bogle's advice to them: "Don't give money away in any market, particularly this one." Limit expenses of all types, like management fees, expense ratios, sales loads and unnecessary taxes.

One good thing you can say about the current market: it could be a good litmus test for your true risk tolerance.

Many financial advisers are used to clients who claim a high threshold for risk. But when the stock market starts to climb and fall on a regular basis, they change their minds.