As I write this, U.S. equity markets have pulled themselves out of correction territory, with both the S&P 500 and the Dow Jones Industrial Average rising to a little better than 5% off their record highs. Only time will tell whether this is just a momentary pullback or the beginnings of something more sinister.

What is certain is that market volatility has finally come out of hibernation, jangling the nerves of many investors who have become complacent during the recent rising tide. This isn’t always a bad thing. If anything, it reminds us to stay on our toes.

#-ad_banner-#So, with the reminder that markets can and do go down, it makes sense to do a little portfolio housekeeping. Here are three things I recommend doing in the current market environment.

1. Review Your Objectives
Are you approaching your goal? Whether it’s retirement or paying for college, if that’s the case it may be time to step back, look over your portfolio, and asses the amount of risk you’re taking. If you’re running a balanced portfolio (stocks and bonds), the stocks allocation has probably pulled ahead of the bonds portion. If your plan requires dialing back some of your risk, shifting some of your stocks to bonds is one of the most logical ways to accomplish this. Bonds have joined stocks in the recent selloff. This means there are some opportunities to buy some areas of the bond market at better prices.

2. Take Profits
While the markets overall have given up 5% or more, you are probably still sitting on handsome, unrealized gains. Consider taking some of those off the table. If the fundamental story of the underlying stock is still intact and there is still room to move, consider selling off one third of your position. If the stock looks stretched out and the story has run its course, maybe sell half or more.

Naturally, selling will generate some cash. Should that cash go back to work? Not yet. Hang on to it for a bit. The cash will serve two purposes. First, it will supply some dry powder for the next pullback (with the return of market volatility, conventional wisdom tells me it’s going to stick around for a bit). Second, cash doesn’t go up or down and will provide some buoyancy when things turn choppy.

3. Add To High-Quality Stocks
5% to 10% pullbacks ALWAYS create some type of opportunity. While the overall market may be down 5 or 10% from its highs, some stocks may be priced better. Make a shopping list and hunt for high quality names you’ve always wanted. Here are some I like right now:

The grandfather of information technology, IBM (NYSE: IBM), is trading at a 14% discount to its 52-week high, with a forward P/E of just 11.3 and an attractive 3.8% dividend yield.

Utility beast Duke Energy (NYSE: DUKE) is off 17% from the 52-week high with a fat 4.6% dividend yield.

And finally, shares of paper maker Kimberly Clark (NYSE: KMB), a great defensive, consumer staples go-to name, are marked down 15% from their 52-week high, boosting the dividend yield to 3.4%.

Risks To Consider: Whether the correction is over or not, market volatility is back. Get used to it. Just like crossing the street, always look both ways. The good news is that of the three stocks mentioned, two, DUK and KMB, are extremely defensive. If nervous investors buy stocks, they will gravitate towards the defensive names.

Action To Take: Forgive me, but I’m going to conclude with a Vanilla Ice quote: “Stop. Collaborate and listen…” It is never a bad idea to take a step back and assess your situation. If adjustments need to be made, make ’em! Better now than in a panic.

Editor’s Note: It’s the most surprising portfolio most investors won’t invest in… though some of these blue chips have doubled the market each of the past three years. Click here for the full report.