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Now that we can bear to open our retirement plan statements again, it might be a good idea to revisit some investment fundamentals. Otherwise, the next bull market will just lead us by the nose to another feeding trough of irrational exuberance.

Of course, the market rises "on a wall of worry" and there are many events that could stand in the way of investment satisfaction, but on the whole, there is reason for optimism. The economy's attempt to achieve some gains may amount to a very slow march, but the plus side of a slow recovery is that interest rates will stay lower than they would if things heated up. Meanwhile, I find it reassuring to read that Treasury Secretary Tim Geithner, speaks fluent Chinese. That may come in handy in dealing with our biggest non-U.S. creditor.

But first, to get our bearings, the market is off about 40 percent from its high of 2007, but dividends reinvested since then reduce the loss to about 35 percent. For people with about a third of their money in bonds, the loss has been about 25 percent, but dividends and bond interest payments have reduced that loss to a little less than 20 percent. In October of 2007, the account balances we all enjoyed represented an annual rate of return of around 10 percent assuming we had been saving regularly for 20 years.

Where we are today represents about a 7 percent rate of return over the same time period. Not good, but far better than any risk-free money market during the same period.

Another 30-plus percent burst like we've seen in the past two months could put us back within striking distance of our expected 10 percent average annual return. Then we would be back on track.

For those who own a part of the $9 trillion in cash sitting on the sidelines, this would be a good time to dollar-cost-average back into the market on a regular installment basis.

If we have another downdraft over the summer months (triggered by the "summer doldrums") it may be the last time to pick up shares at relative bargain prices.

If your psychological makeup just can't handle a second drop to the lows we experienced back in March, consider getting into both the stock and bond markets with regular investments in both stock and bond funds. You can see from the figures above how a bond component can blunt the effect of a crash.

It's impossible for anyone to second guess these enormously complex influences on market results, so the only constructive approach is to diversify, reduce investment costs as much as possible, and periodically rebalance.

Diversification should include some money in small-company funds and foreign funds with the bulk of the holdings in large-company value oriented funds that pay dividends.

For older investors, at least some bond component can make sense, but don't forget that home equity should be considered to be a "bond-equivalent" asset if you're wondering what the proportions should be.

When it comes to selecting financial services, remember that in most investment tools, you have "silent partners" that include taxes and fees. For retirement plan money, the taxes are nonexistent, and fees are largely out of your control until you roll your money out into an IRA. For taxable assets, it's a different story.

On taxable investment money - investments generated from savings, the sale of a house, an inheritance, etc. - the taxes and fees on a mutual fund can take up 40 percent of what otherwise would have been your profit over the years.

As fund managers buy and sell stocks, short-term and long-term realized gains are reported each year for tax-calculation and payment purposes.

For any meaningful performance analysis, these costs must be subtracted from reported performance figures.

Most of this drag can be avoided by using index funds.

These so called "passively-managed" investments offer plenty of opportunity for gains and diversification without triggering the annual tax obligation and management fees that take such a huge bite out of actively managed account balances.

There are currently more than 200 index funds that track a wide variety of different investment styles and types.

They charge about one-fifth the annual cost of most mutual funds.

Their stock turnover is usually less than 10 percent per year, so realized taxable income is kept to a minimum.

For those who bailed out of the market and for those who stayed fully exposed, the advice is the same. It's time to get back on the horse.

Use the experience to reassess the quality of your investments and the extent to which they make sense as part of a larger plan. In other words, "Don't let that crisis go to waste." Recognize the last 18 month period for what it has been - a powerful learning experience.

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