How to Recover From a Hit to Your 401(k)

Dear Dr. Don,

I need your advice. A year ago, when I was age 50, I had $462,000 in my 401(k) portfolio invested in a stable value fund paying 6.5%. I did that because I felt that the stock market was due for a crash after overheating in late '99 and in early '01. Then, a chatty equities salesman talked me into getting back into the market. After all, the markets had dropped significantly between May and September, 2000. It was a "buying opportunity"!

So I put 90% of this 401(k) money into big-name, top-rated funds and about 10% into his recommended individual stocks. No bonds. I got creamed. Today, one year later, I have only about $340,000: a 26% drop. The Wilshire 5000 index suffered a nearly identical drop during this period. ...