The media is full of both good and bad advice on how to profit from this downturn.

Jason Zweig, for instance, has an excellent column in today's Wall Street Journal reminding investors to take a contrarian point of view. It gets at some of the nuances of what's going on inside people's heads when the market stumbles.

On the flip side, Jim Wiandt has listed out some of the more breathless "advisory emails" that piled up in his inbox last night. These suggestions aren't worth the electronic paper they're printed on.

You can find more advice on Marketwatch, MSN Moneycentral, TheStreet.com and a thousand other Web sites. For the most part, it all follows a similar pattern: don't panic, don't catch falling knives, and take a long-term view at your investments.

Motherhood and apple pie.

The problem with this kind of advice is that it doesn't give investors anything to do. It's really hard to sit on your hands at times like this, watching the markets crumble. Depending on your personality, you either want to grab some bargains or rush to sell whatever's left of your portfolio. Either way, you want to do ... something.

Here's what you can do: harvest your losses.

I know: b-o-r-i-n-g. Who cares about taxes when there's blood in the streets?

Well, you should care. Because right now, chances are, you've got some losers in your portfolio. And tax-loss harvesting lets you take action and profit from losses, without making rash decisions that would hurt your portfolio in the long run.

Here's an example of how it works. If you bought an S&P 500 index fund any time since mid-October 2005, you've lost money.  In a taxable account, you could sell that fund, realize the losses and then invest the proceeds in a comparable product, like a fund or ETF tied to the Russell 1000 Index. That second part is critical—you must immediately invest the money in a similar (but not identical) product to maintain your overall asset allocation. Otherwise, you risk making the kind of rash move that Zweig and others warn against.

The operating rule is the IRS' "wash sale rule." It says that you cannot claim a capital loss if you sell one position and replace it with a "substantially similar" position within 30 days. What "substantially similar" means is up for debate, but most people agree that two index funds tracking different indexes are not substantially similar. (You wouldn't want to sell one S&P 500 fund and replace it with another S&P 500 fund; that's too close for comfort.)

After 30 days, you can sell your Russell 1000 fund and invest the money back into the S&P 500 if you want.

The chance that the two funds will perform differently over the next 30 days is small. In August, for instance, the iShares Russell 1000 ETF (NYSEArca: IWB) delivered 1.37%, while the iShares S&P 500 ETF (NYSEArca: IVV) delivered 1.44%. Big whoop.

But the money you can make from harvesting losses is significant. You can use your realized losses to offset gains in other parts of your portfolio or, if you have no gains, you can deduct $3,000 from your income this year and carry over your other losses into 2009.

In almost any asset category you choose, you can find pairs of ETFs or index funds that let you tax-loss harvest effectively and efficiently. That's money in your pocket.

(While you're at it, now might be the perfect time to sell that high-cost actively managed fund you have held for years and move into a low-cost index-based ETF.)