After suffering through Wall Street's broadest sell-off in at least a decade in 2000 and the worst bear market in technology stocks in a generation, many investors are feeling understandably uneasy this year.
The last thing they want to do is compound last year's losses with fresh investment gaffes this year.
This caution is understandable, even healthy. But it could be dangerous if it paralyzes investors or worse yet precipitates an ill-conceived retreat out of the market altogether.
In fact, money managers say the worst thing investors could do now is abandon the stock market, which historically has delivered better returns over time than any other investment option.
Instead, these experts encourage skittish investors whether they're invested in individual stocks or stock mutual funds to make seven resolutions that will help them to continue building their nest eggs, while insulating them from some of the downturns that inevitably rattle Wall Street:
1. Take a deep breath.
2. Turn off CNBC.
3. Take a hard look at your portfolio.
4. Cut your tech exposure.
5. Get real.
6. Focus on fundamentals.
7. Be disciplined.
"Don't give up on the market," said Ed Foster, the chief investment strategist at Maverick Investing in Huntington Beach, Calif.
"After a bear market, people are tempted to get out of the market because they believe it has failed them, and they don't come back until the market approaches the top again.
"But the market hasn't failed anybody. People failed themselves when they went outside their risk level and got greedy."
Take a deep breath
Victoria Collins, a money manager at Keller Group Investment Management in Irvine, Calif., says the first thing investors should do is take a deep breath and relax.
The past year's losses may be historic, but history is still the investor's friend.
"Step back and get some long-term perspective," Collins said. "While everything seems very dire right now, because people are living it, history suggests this will become just another blip."
Although market downturns can be protracted and painful, over the medium to long term, stocks rise faster than inflation, making their owners richer.
Turn off CNBC
The stock market, as America learned in 2000, is a harrowing, confusing place that can make normal people act like idiots. Brokers, traders and the rest of Wall Street's money-managing menagerie make the dough they do because normal people don't want to spend their lives monitoring the minute-by-minute ups and downs of the stock market.
So the experts encourage investors to turn off CNBC, delete their Internet browser's shortcut to their Yahoo.com stock screens and take up a hobby.
"Don't check your portfolio three or four times a day," Collins said. "Don't even check it every week. It will drive you crazy."
Review your portfolio
Turn off the TV. Don't turn off the brain.
Investors should take a hard look at their portfolios. Do they see a healthy mix of mutual funds or stocks not just technology, health care, energy, and communication stocks, but financial, basic-material, consumer-staples and cyclical stocks, too? Do their holdings reflect their true risk tolerance and investment time frame? If they went up a risk level in 2000 as they chased 1999's winners, is it time now to ratchet it back down?
"People need to lower their portfolio risk," Foster said. "If they were in aggressive growth funds, if they were in individual stocks, they should step back a risk level. Go to the growth funds or the growth-and-income funds.
"If they can weather the storm in technology, great. But 90 percent of the people who purchased technology funds in 2000 are having trouble sleeping at night because they're uncomfortable with the downside they've just lived through."
Money managers also encourage investors to make sure their portfolios have a good mix of stocks and bonds heavily weighted toward stocks early in life and gradually shifting toward bonds in later years.
Cut your tech exposure
After the tech sector boomed in 1999, sending the Nasdaq composite index up 86 percent, many investors snapped up Internet and fiber-optics companies and high-tech mutual funds, assuming they would turn in a repeat performance in 2000.
Of course, they didn't. But the damage they've done to annual returns is only one of the legacies of the dot-com bubble. Last year's tech rush also has left many investors dangerously overconcentrated in tech shares.
Generally speaking, experts believe that investors should put no more than 25 percent of their equity holdings in the tech sector. As investors prune excess tech stocks from their portfolios, they should focus on fundamentals like companies' revenue growth and profits. Story stocks those with big ideas but little more than business plans are so yesterday. Lose them.
"If you want to avoid shooting yourself in the foot, you should revisit your portfolio," Collins said.
"Determine if it is the right mix for your goals and objectives. Now that you've had the experience of both up markets and down markets, can you sleep at night? If you can't sleep at night, then change the mix and go to a more conservative portfolio, even if it means selling while the market's down. In the long-term it's going to serve you better."
As investors pare down tech, however, they should try not to toss out good companies and good funds with the bad.
"Last year, people threw away perfectly good companies so they could run off and invest in the dot-com world and the momentum stocks," said John Buckingham, the chief portfolio manager at Al Frank Asset Management in Laguna Beach, Calif.
"Now they're doing it again as they run out of technology stocks."
The late 1990s signaled an extraordinary time in the stock market, with the major stock indexes turning in performances that were substantially better than normal.
Unfortunately, investors grew used to the higher-than-average returns and came to see them as normal. In 1999, the 86 percent rise in the Nasdaq was seen by many as an indication of where returns might be going in the years ahead instead of a warning that the market was dangerously overvalued.
Speculative mania surrounding the market for initial public offerings where some Internet stocks rose 100 percent or more on their first day of trading added to the unrealistic expectations.
It's time to get real, experts say. The stock market doesn't routinely rise 25 percent to 30 percent a year, as it did between 1995 and 1999. Annual gains between 5 percent and 15 percent are more normal. Negative years aren't all that unusual. Get used to it.
Focus on fundamentals
The experts say investors should focus on corporate and economic fundamentals before they buy or sell any stock.
That means investing in companies not because their stock is cheap or dear but because they are healthy businesses that make money and are likely to make even more money down the road.
It also means understanding that even in serious downturns, some companies think Johnson & Johnson can make great money.
Focusing on fundamentals also means learning to break a nasty habit.
During the tech mania of 2000, when stock prices were, in the words of John Buckingham, "priced for the perfection of the supposed new paradigm," investors were unforgiving when a company disappointed them by failing to meet sales or profit expectations.
Finally, the experts advise both stock and mutual-fund investors to be disciplined, coming up with a long-term investment plan and sticking to it.
That means continuing to squirrel away retirement money into investments they're comfortable with even when the market is going sideways.
"Don't be concerned about volatility," Collins said. "Use it as tool to buy when you find good stocks that you'd like. Buy them when they're down and then just forget about the daily ups and downs."