Investors might see uncertainty at almost every turn as we reach the halfway point of 2004.

Despite many short-term unknowns -- the extent of the

Fed's

interest rate hikes, the future of the conflict in Iraq, the outcome of the presidential election and the possibility of an oil shortage -- investors need to stay focused on their long-term investment goals.

That's the advice of the CFA Institute of Charlottesville, Va., which administers the chartered financial analyst program.

To earn the prestigious CFA designation, the gold standard for investment professionals, candidates must pass a series of three six-hour exams over at least two years. The 56,000 charter holders worldwide work for banks, mutual funds, brokerages and as financial advisers to individual investors.

"What the CFA program teaches people is to have a very long-term perspective," says Robert R. Johnson, Ph.D., CFA and executive vice president at the CFA Institute. "Long term is years, looking at your life and being able to position investments for your goals in your life."

All investors should monitor their portfolios -- not necessarily every day, but periodically. Every quarter wouldn't hurt. But that doesn't mean conducting a major overhaul. In a period like we have today, where it appears the economy is moving from an era of low interest rates to one with higher ones, some gentle tweaking might be in order, Johnson says.

It's definitely not a time to flee the market.

"People realize we're going into a period of uncertainty," Johnson says. "That is already embedded in market prices. It's actually a pretty good time to get in."

Investors who are dollar-cost averaging, such as those with 401(k) plans, and therefore buying more shares when prices are lower and fewer shares when prices are higher, are already ahead of the game.

We can't know what will happen with interest rates in the short run and how they will affect securities, Johnson says. "But over the long term, the stock market is a wonderful place to build wealth."

In the meantime, the institute reminds individual investors to avoid what its members have identified as the most common mistakes that drag down overall investment returns:

No Strategy

Just like a professional money manager, every investor should have an investment policy statement, says Johnson.

This should include the investor's goals and objectives such as buying a house, a college education for the children and retirement; constraints such as a short amount of time, low liquidity or tax burden; and risk tolerance, which includes not just the ability to bear risk, but the willingness to take it on.

Then the investor needs to devise a portfolio with an asset allocation, or a mix of investment assets, that works with the policy statement.

Investors need to revisit their policies annually. "Your investment policy statement is going to change over time," says Johnson.

Unrealistic Expectations

In the late 1990s, almost any investor could earn 25% a year simply by investing in the stock market. Historically, however, the average annual return is closer to 10%, or 6% after inflation, says Johnson.

It's only to be expected that in other years, market performance will help revert to the mean. "People definitely need to ratchet down their expectations," he says. Recent years have brought "people's expectations into a more realistic framework."

Undiversified Portfolio

Many academic studies have shown that how investors allocate their assets among different asset classes, such as large company stocks, international stocks and real estate, is more important to their returns than the individual investments themselves.

That's why it's important to stick to the asset-allocation plan and rebalance as needed. To use a simplistic example, if stocks have a good year, a portfolio that is meant to be 60% stocks and 40% bonds, might end up 75% in stocks and 25% in bonds. To return to the original formula, the investor would be automatically selling some stocks when they're high and buying some bonds when they're low.

Given the seesawing of the stock market in the past six months, says Johnson, "I don't think you're going to see much need for rebalancing. I wouldn't recommend any wholesale changes."

However, investors who anticipate that interest rates will continue to rise the rest of the year might want to tweak their portfolios, he says. They should consider trading bonds with long durations for those with shorter durations to avoid loss of principal (bond prices fall as interest rates increase). And they might want to tilt away from interest rate-sensitive stocks like banks and apparel companies, in favor of mining, petroleum and metals stocks.

Buying High

Everyone knows the fundamental rule of investing is "buy low, sell high," but still many investors manage to do the opposite.

The main reason is "performance chasing," says Beth Hamilton-Keen, CFA of TAL Private Management in Calgary, Alberta. "Too many people invest in the asset class or asset type that did well last year or for the last couple of years, assuming that because it seems to have done well in the past it should do well in the future. That is absolutely a false assumption."

High Fees

Many investors find it hard to say just how much they are paying in fees to their investment service provider. They should, before opening an account, be fully informed on all expenses. In addition, investment returns should be adjusted for all expenses paid, so investors know the true overall performance.

Neglect

While some people fail to start an investment program because they don't know how to begin, others fall into periods of inactivity due to discouragement over investment losses or lackluster performances in the market.

But individuals should invest in a variety of markets through different investment vehicles and set up a mechanism, like an automatic paycheck withdrawal program, to make regular contributions to their portfolios.

Before joining TheStreet.com, Ann Perry was the personal finance columnist for The San Diego Union-Tribune. She is the author of "The Wise Inheritor: A Guide to Managing, Investing and Enjoying Your Inheritance" (Broadway Books, 2003). She has a B.A. in English and Communications from Stanford University and a master's degree from the Columbia University School of Journalism. She can be reached at

Ann.Perry@thestreet.com.