Investing Gameplan

It's possible to strike a balance between checking your investment account every morning (and tempting yourself to make inopportunely timed changes) and complete and utter portfolio neglect. The following steps should get you on your way.

Step 1: Do your own heavy lifting. Whether you're talking about home prices or the stock market, forget the days when rising prices did all the heavy lifting for us. Most people who have amassed real wealth in this world did it the hard way: They deferred spending today in order to save for tomorrow.

Step 2: Get a plan. Investors need a blueprint--an overarching view of how much they should have invested in stocks, bonds, and cash given the age at which they hope to retire, how much they're saving each year, and their risk tolerance. Instead of getting a big-picture view of how they should be investing, many investors proceed straight to picking individual funds, often basing important decisions on the meager information their employer and plan provider have given them.

Not having a target asset-allocation mix can leave you feeling particularly adrift at a time like this, but there are some basic rules of thumb for determining the appropriate stock/bond mix. A common one is to subtract your age from 100% to determine how much you should have invested in stocks and stock funds. That's better than nothing, and holding at least a little in bonds would've helped many portfolios hold up much better than they did in 2008.

Step 3: Make sure you have a rock-solid core. Because many plans offer a long menu of choices, it's tempting to fill up on a little bit of this and a little bit of that. But the biggest favor you can do is to stay away from the niche offerings and instead build out a solid core of rock-solid funds. Such holdings should make up 75% to 80% (or more) of your portfolio.

Step 4: Avoid the big mistakes. Last, but not least, vow that you'll do your part to avoid the big mistakes that can bedevil investors by loading up on company stock. The demise of Lehman Brothers, where many employees had also invested heavily in company stock, provides an updated case study.