Is it time to sell yet?

The news is certainly getting worse. Bank failures are mounting, oil prices -- while they've dipped a little in recent days -- are still way up over this time last year, and inflation rumbles continue.

For some, the temptation to get out and avoid more losses is growing by the day. Others, holding their worries in check and mindful of history, are gritting their teeth and holding course, hoping the bear will wander off soon. A few have already sold out and are hoping to time their reentry for maximum profit, but that's not usually a winning strategy.

I'll tell you what I'm doing: I'm buying.

But the market stinks right now!
Yes it does, but that can be a good thing. Mr. Market is a funny fellow. Sometimes he prices things really high, and sometimes he prices the same things really low. Over time, the prices have always tended to go up -- but every now and then he feels the need to hold a deep-discount sale. That's what we've got now. Wouldn't you rather buy during a sale?

That may seem like an overly simplistic analysis, but here's the plain truth: Buying good stocks in beat-up sectors -- and holding them through market ups and downs -- is a time-proven path to wealth. It's just basic value investing and it works. "Be greedy when others are fearful", Warren Buffett has said. There's a lot of fear out there right now, and there are plenty of good ways to take advantage of that fear -- as long as you stick with situations you understand.

Don't join 'em, beat 'em
Want an example? Take a look at Wachovia (NYSE:WB), which reported a huge loss early last week and was way down when it opened the next morning. If you thought Wachovia was likely to survive its current crisis and return to its former blue-chip self, the kind of stock one holds for decades, wouldn't that have been a great moment to buy? Apparently lots of people thought so -- despite the balance sheet carnage, the stock rallied and ended the day up over 27%.

People made big bucks from having had the foresight to buy Altria (NYSE:MO) in the wake of the tobacco hearings, Apple (NASDAQ:AAPL) when it looked like the Mac was going to be eclipsed once and for all, or BP (NYSE:BP) when oil prices seemed like they'd never go up again. Those who wade into bank stocks now might join them in the future.

On the other hand, selling in a deep bear market can be a disaster. Imagine if you'd held Amazon (NASDAQ:AMZN) through a bull market, only to sell it at $6 in 2001. Imagine if you'd sold Akamai (NASDAQ:AKAM) at ninety cents six years ago, or Yahoo (NASDAQ:YHOO) for a split-adjusted $5.

Those are extreme examples, but you get my point: Bear markets have a way of making good stocks look bad. In those circumstances, good investors have a way of finding great values.

Everyone needs some value
No matter what your favorite investing style happens to be, value stocks are an important part of a well-diversified retirement portfolio. They shouldn't be all you hold (unless you're Joel Greenblatt), but a well-constructed portfolio that combines value stocks with other types of investments will give you a smoother ride and better returns over the long-term.

The trick is in that "well-constructed," of course, but diversification strategies need not be complicated. In the July 2008 issue of the Fool's Rule Your Retirement newsletter, advisor Robert Brokamp presented a very useful asset allocation template for retirement investing. (It's a paid service, but you can get full access to back issues free for 30 days with no obligation, so click with confidence.)

The template looks quite simple -- and it's very simple to implement -- but there's a lot of thought and research behind it, and (thanks to the Fool's independence) it's far more sensible than the allocations recommended by the "calculators" on most investment company website. Check it out soon -- Mr. Market's bad mood isn't going to last forever.

Fool contributor John Rosevear was in a bad mood once -- but then he bought a couple of beaten-up blue chips on the cheap and felt much better. He owns shares of Apple. Akamai Technologies is a Motley Fool Rule Breakers selection. Amazon.com and Apple are Motley Fool Stock Advisor recommendations. Try any of our Foolish newsletters today, free for 30 days. The Fool's disclosure policy loves a bargain.