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January 3rd, 2009
03:40 PM ET

Ok, you lost your shirt. Here's what you have to do now:

Ali Velshi
CNN Chief Business Correspondent

You could not have escaped 2008 unscathed.

*The Dow ended the year 33% lower.
*The S&P 500 ended 38% lower
*The NASDAQ was down more than 40%

Even if you followed all the rules and diversified your savings, you lost 30-40% or more in 2008. Virtually nothing could have saved you.

But history tells us that big opportunities follow those kinds of
declines. And you can start building – or rebuilding – your wealth right away.

Friday's massive market rally is a perfect example of why you can't be trying to wait out this market turmoil.

You have to be in this market, period. A lot of people don't want to hear that but unless you have a rich uncle who is about to pass on and leave you a small fortune, the markets are the only real (legal) way to create wealth. And you can take part in them without become a trader, and without buying a single individual stock. Spend just a few hours learning about how markets work, and how they can work for you, make a few tweaks to your 401(k) or IRA, and you're on your way to a more secure financial future.

YOU HAVE TO DO IT.

Take these 10 steps right now to become a better investor:

1. Pay off any debts costing 10% or more per year before investing for retirement.

2. Take a "risk tolerance" test to find out what kind of investor you are, and don't put money you'll need access to within five years into the market.

3. Tax-advantaged savings plans – especially those to which your employer contributes – are just about the only "free money" you'll ever get.

4. Asset allocation – the appropriate distribution of your money
across several types of investments – lowers your risk AND earns you
a higher return than if you just invested in one or two types of assets.

5. Understand how different "asset classes" work. Take a few hours
to learn the key features of stocks, bonds, cash equivalents and
alternative investments.

6. Mutual funds, index funds and Exchange Traded Funds (ETFs) give
you instant diversification, with less risk than owning individual stocks.

7. Keep your investment costs low. Fees, commissions and expenses
can eat a big chunk of your returns over time.

8. Rebalance your portfolio at least once a year. Keep your portfolio aligned with your "asset allocation" by selling some of your winners, and buying more of some investments that have suffered.

9. If you leave your employer, roll your 401(k) over into an IRA immediately. It's the only time you can convert your 401(k) into a retirement vehicle with many more options.

10. Remember that investing takes discipline, but it allows you to
control your financial future.

Watch Ali on CNN at 3pm Sunday as he introduces his new book, "Gimme My Money Back: Your Guide to Beating The Financial Crisis"


Filed under: 360° Radar • Ali Velshi • Economy • stocks