[Note: This is NOT investment advice, just my opinions. Please consult a registered investment advisor before placing trades or investing.]

Step 1 – Evaluate Your Situation

If you are reading this I presume your portfolio, whether regular, 401(k), IRA or some other pension has been decimated – possibly literally (1/10 it’s previous value).

How did you get here? Whose investment advice have you been listening to? Acting on?

Did you invest only because you were under the (now accepted, previously ridiculed) perception that stocks always go, eventually? Do you really not have the stomach to see losses?

If this is you, then I recommend you get with a financial advisor and begin the process of liquidating any market oriented investments and move to cash and short term treasuries. Take a look at you tax situation with regard to any taxable portfolios and understand that tax selling is likely to get worse in the next few weeks, so either sell now or sell on any rallies.

If you happen to be at or near retirement age and you have lost money that is important to your retirement then you have my sympathy. You should not have been in the market and you may want to investigate your options with an attorney.

Are you a gambler?

If you are currently sick over your losses and waiting for the market to return your money to you then I would suggest you are near delusional. The market may come back, the stocks you have may react inversely to the market as a whole, but in essence you are gambling.

No one knows what the market will do or when. Even less so in the current economic and financial crisis. Just yesterday the market (DJIA) was down over 300 points when President Bush spoke (about what I don’t even know) and the “market” turned around and posted a 6% gain for the day. Almost a 10% swing from bottom to top.

Now today it’s down again.

If you want to gamble I suggest a casino – there’s almost one on every corner nowadays. You get your results a lot sooner.

Take your lumps, move on and never look back. There are professional traders with decades of experience being chewed up and spit out in this current market environment; how do you expect to fare any better?

Sure, maybe the government will bail us all out; sure. Look at the job they’ve done so far – how’s that working for you?

Who have you been listening to and did you act?

Gary North told us to sell all of our stocks in March of 2000 right at the peak. He’s been reminding us of that for over 8 years now. Good call; but a lot of us made a great deal of money from 2002 up until 2006 or so in precious metals stocks and uranium stocks.

We definitely did NOT take enough profits. Casey Research has advocated a “free ride formula” that I’m sure most of us didn’t implement enough either.

So who have you been listening to? How has their advice worked out? If poorly, dump them. Now. If, like most advisors, there have been some good calls and some bad, then decide now whether any failures they made they have acknowledged. No one is perfect, there is no crystal ball.

If the advice you were paying for, or getting for free, was pretty good but you didn’t follow it, then it’s time you either turn your money over to a money manager or learn to take control.

The TREND letter ($50 discount through this link only!) has had some fantastic advice, and with the stop losses they have implemented their subscribers should have a good portion of their capital intact and in cash, ready to be deployed at much lower prices. But as they are known for repeating over and over – “It’s your money, take control!”.

What exactly have you got left?

If you are still reading, it should mean that you are not in the category described above of people who have no business being in the market anyway.

So let’s take stock and see what you have left.

Hopefully you made a pile of cash on the short ETF’s and other short strategies that have made enormous profits as the market fell. You don’t want to pay tax on those gains while sitting on huge losses in your portfolio, do you?

So you have to figure out what to sell for tax purposes and get it sold. Remember, you can’t buy it back for 30 days or it falls under the “wash sale” rules and it doesn’t count as a loss.

Look at each security in your portfolio and recall why you bought it. If the same reasons don’t apply today, sell it; whether at profit (yeah, right) or loss. Tally up the losses and see if it covers your gains. If not, I suggest you keep selling. Sell the trash, poor performers, or just the stocks you don’t expect to move for at least 30 days.

Find a financial newsletter that fits you

There are all kinds of financial newsletters out there. Find some good ones where you agree with the overall premise that the editors do. Then maybe find one that doesn’t agree just to keep some balance.

Use the experts available to you to help determine which stocks are keepers, and if so, do you average down? Dennis Gartman says NEVER average down, but I have used it successfully many times.

If you are into precious metals and/or energy stocks, you definitely need a good newsletter service to help you determine the potential winners from next week’s toilet paper.