Be aware that your risk tolerance is probably lower than you thought

Perhaps the biggest lesson of the past 12 months is that most of us are a lot less bold with our money than we imagined. "When the market was going up, you said you had a high tolerance for risk. When it went down, you became intolerant in a hurry," observes Wall Street Journal columnist Jason Zweig in his recent book, "Your Money and Your Brain: How the New Science of Neuroeconomics Can Help Make You Rich" (Simon & Schuster, 2008). So take with a grain of salt those old rules like the one that says young people can afford risky "aggressive" investments because they have more time to make up losses, while older folks should stick to safe "conservative" choices." If you ask 10 different people what 'conservative' means, you will get 10 different answers," says Greg Plechner, a certified financial planner with Modera Wealth Management in New Jersey. Focus instead on your time horizon, or how soon you'll need the money. The sooner that is, the less risk you should take. And whatever your age, remember the market gyrations of the past eight months, and be realistic about your capacity to hang in there if things tank.