A lot of people have lost money in the stock market. And for the most part, it wasn’t their fault. What should small investors do now, to protect themselves, for the future?

Almost two years ago, as the stock market was collapsing, investors frequently found themselves without the knowledge or the power to prevent their assets from diminishing.  Take the case of a husband and wife in their late 50s, whose investments in the stock market dropped over 40 percent. The couple was frantic, as they were close to retirement age. They considered immediately selling all their stocks, as their declined valued. But the couple took advice from a friend who was an experienced investor. He told them not to act in haste. Fortunately, the couple followed that advice and their stocks rebounded substantially last year.

Another family got nervous about bank failures. They thought about withdrawing the cash in their savings account, in case their own bank failed. A number of their friends had taken money out, and were keeping it at home, in spite of the risks of fire or burglary. That family stayed with their bank. A couple in their late forties wanted to buy another house for investment, near their lake  area vacation home, but the mortgage undertaking would deplete their saving and put them in hock, in a down economy. They decided to wait for better times, even though they could make a good buy, now.

What can we learn from what worked or didn’t work for people? The main lesson is to take time before acting precipitously, learn the facts, think about your objectives, and only then, act.

If you have been fortunate enough to build some assets, they are likely invested in homes land, bank accounts, or stocks and bonds. For investments in stocks and bonds, what is most important for people is to educate themselves on dealing in stocks.

One suggestion is to go online with your computer, to find out about the specific investment stocks that interest you. You can get stock quotes, corporation news and research data including copies of a company’s 10K reports. This will give you financial information to review a company’s cash flows, profits and dividend payouts to help decide whether or not to buy that company’s stock.

All investors are affected by time and risk factors. Younger investors can hold stocks or bonds for longer periods of time, before their investments become profitable. Older investors don’t have that luxury of time.  You must devote time to your portfolio, to identify your current financial condition, your financial goals, and your ability to take risks. For example, if a goal is to have $75,000 saved for your child’s college education, by the year 2020, you need a strategy to achieve it. You could put a fixed dollar amount into stocks each month.

For cautious investors, a mutual fund might be the answer to reach this goal. Mutual funds are less volatile, safer and accountable. They are run by trained professionals. No-load funds have clearly-defined costs, which are lower than the fees and commissions charged by many full service investment firms.

You can use a stock broker firm to represent you on your stock investments. Or a professional financial advisor, who charges a fee or commission, to help save you taxes, buy insurance, make up an investment plan, or add real estate investments. You can even place your stock orders yourself with a discount stock broker.

When in doubt, small investors can do dollar-cost-averaging, by putting in the same amount of money each month on the same stock for several months. This averages out the stock costs overall, as the individual stock price goes up and down.

Another trick is to rebalance your investment portfolio each year, so your target risk will be spread out over large cap, small cap and international stocks, as well as fixed income and cash investments. Your investment matrix could include savings accounts, CDs, bonds, money market mutual funds for income or growth, tax shelters and real estate investments.

Lastly, people are living longer today. Retirees need to maintain a decent standard of living, and Social Security alone will not maintain a middle-class standard of living. Whatever your age is now, you need to plan for the rest of your life, by starting to save immediately.

It can be very tough to save, in a down economy. But along with the other adjustments we are all making, we must discipline ourselves to save for our own future needs.

— Bernard Featherman is a business columnist and past president of the Biddeford-Saco Chamber of Commerce. He can be reached by e-mail: bernard@featherman.com.