Officially, a bear market is described as a fall of 20%.

With the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) trading down around 1% on Monday after heavy falls on Wall Street and other global markets last Friday, the ASX is now down almost 19% from its March 2015 highs when the index was within a whisker of touching the 6,000-point level.

Not only is the local market now just shy of 1% away from officially being declared a bear market, but the index is now trading at the same level as it was back in early 2013!

The situation is terrible news for many self-managed super fund (SMSF) investors, particularly when you consider what has happened to many blue-chip income stocks.

After years of SMSF investors piling into the share market and enjoying some spectacular gains from a range of blue chips including the banks and major miners, the performance of these same portfolios is, in many cases, now much more sanguine.

The market isn’t just about the movement in the index but also the dividend yield it provides, unfortunately many investors have blindly chased yield without giving due thought to the effect of capital losses (realised or unrealised) on their overall level of wealth.

For example, while stocks such as Westpac Banking Corp (ASX: WBC), Telstra Corporation Ltd (ASX: TLS) and Woolworths Limited (ASX: WOW) have all been offering up attractive yields, this income has been outweighed since March 2015 by falls roughly in line with the index.

What to do now?

The most important thing SMSF investors can do right now is to not panic.

While market volatility has certainly increased and share prices have fallen, selling now could turn out to be a bad decision in the long run.

So long as the stocks in a portfolio still enjoy favourable long-term prospects and if they have been purchased at reasonable prices then an investor with a long term buy-and-hold strategy should hopefully be able to look past the current market volatility and focus on the long-term potential of investee companies.

As the ASX flirts with 5,000, some experts are predicting a market crash...

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Motley Fool contributor Tim McArthur has no position in any stocks mentioned. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.