Vanguard's John Bogle gives excellent advice:
"Buy and hold a very diversified portfolio, U.S. and global. Minimize trading fees, mutual-fund management fees and sales loads, and investment-bank fees.
Another important lesson: Always hold some bonds. I happen to like short-term bonds better than money markets, because they yield a bit more and they don't fluctuate very much more -- high-quality short-term bonds, 10% to 20% of your portfolio. If you are older, a lot more than that.
Another very clear lesson this year for investors is: avoid complexity. If you don't know what the fund is investing in, don't buy it. Wall Street has created those derivatives and those collateralized debt obligations of very uncertain problems with very high risk, just to earn a little more return. Another lesson is that, if you think you are getting a premium yield, assume that you are taking a premium risk.
Looking ahead to the next year, be risk-averse. I would never tell anybody to get out of the stock market. You want to think of how your account is balanced. For example, if you normally want to be 75% in stocks, I'd rather be 65% than 85%. I believe it's a good time to be a little more cautious."
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