Lesson 1: The stock market is still cyclical
After five 5 of positive returns for the markets, investors thought the good times could last longer. Yet the market sent shares in sectors that climbed too high down to earth.
Financial stocks plummeted after the end of a multiyear run of strong performance.
Natural resources companies like RIO and RTP climbed only to lose well over half their value in the ensuing months.
Oil and gas stocks like COP and XTO rode the wave toward $150 oil only to lose years of gains between July and November.

Lesson 2: Analyze your exposure to the financial sector
Whether you hold stocks, mutual funds, or ETFs, you may have more exposure than you think. If you own the S&P 500 index, for example, you are 15% invested in financial firms.
Even with the federal government stepping in with aid, banks and financial institutions are facing a battle, if you're holding a lot of financial stocks, you better be sure you understand how these companies make money and what the risks are in today's environment.
If you are going to invest in financial companies, choose those with strong balance sheets, conservative lending standards, and some measure of transparency. Risk-takers LEH and FNM truly got themselves into trouble, but BBT and WFC), for instance, are more likely to emerge from this crisis in an even stronger competitive position.

Lesson 3: Don't make rash decisions, first find what level of risk you are prepared to handle.
When you take a long-term view of investing, volatility isn't as much of a concern. If you're focused on the big picture, even harrowing market drops won't ruffle your feathers, because you know over the long-run the ups and downs tend to smooth out into a nice upward trajectory.
It's going to be especially hard in the coming months to stay focused and dispassionate, as the bad news is almost certainly far from over. This isn't to say you can't make adjustments to your portfolio in times like these , just make sure you've got a solid, strategic reason for making changes, rather than selling and running away in fear.

Lesson 4: Make sure you've got a diversified portfolio
But one of the best defenses against the financial crisis is a diversified portfolio to protect yourself in bad times with a sector.
Do Not put more than 10% of your money into any single stock.
Do Not own more than two stocks in the same industry.

Lesson 5: Don't run out of ammunition
Turn off the TV! While government bailouts and plunging markets make for great headlines, they aren't the best trading indicators. It's perfectly reasonable to want to keep up with unfolding events, but making rash buying or selling decisions based on the latest updates from the media circus is a losing strategy.

Lesson 6: Use market drops to look for new opportunities
You make most of your money during a bear market, you just don't realize it at the time.
Some investors took advantage of losses during the first part of 2008 but if you ran out of cash early in the year, you missed out on some even better bargains that became available in October and November.
Make sure you keep a reserve of cash use in a market downturn, you won't always pick the exact bottom, but make sure you don't come up empty at the best time to buy.
The bright side of a market sell-off is that investors can snap up some terrific stocks that have been dragged down with the rest of the market.
With the economy in a tailspin, declining housing prices, and tightening credit, there's a chance the U.S. could be entering a deflationary period. Inflation was down slightly this month (albeit to 5.4%), and this week the Fed, in light of declining energy prices, refused to cut rates any further.
You might investigate companies that do well in deflationary times such as utility stocks. Consider giving Dominion Resources (D), PCG, or SO a second look. If such an environment does take hold, you'll be glad you did.

Lesson 7: Volatility is here to stay.
The market emerged from a quiet period during 2008. Investors got accustomed to stability and stocks rose substantially with only a few corrections along the way.
In October and November, the Dow closed with a gain or loss of more than 100 points in all but 6 sessions. Swings of 400-500 points within a single day have been quite common. Smart investors have, capitalizing on unique opportunities to grab shares at bargain prices.
Just ask investors who picked up shares of BRK-A, BRK-B at levels not seen in the past five years.
Athough market prices change every minute, the fundamental value of the business does not. Have faith in your assessments, and when the market gives you a bargain, don't doubt yourself grab shares while they last.

Lesson 8: Stock picking isn't easy
In a bear market, rules have changed, the bests weren't immune from value traps like FNM and AIG and even stocks with strong fundamentals didn't escape without losses.
Don't give up on picking stocks, but don't expect to be right 100% of the time. Take measures to cut your losses while extending your winners as far as they'll go. You'll get greater profits in the end.
If 2008 is a year want to forget don't forget everything, remembering the lessons you've learned, you'll be a better investor for the rest of your life, Here are some simple rules that you can use:
- Do Not plunge into the market, spread the investments over time
- Use Stop-Sell orders to limit risk
- Use your philosophy, technical or fundamental analysis, we have each worked out a method that works for us, but look at the way others do their analysis and picks.
- Each pick is either at/or approaching its 52-week high
- Experiencing a spike in its daily volume
- Each has been trending upward for a defined period of time.
- Buy stocks with consistent, predictable earnings growth (best diviend)
- Buy stocks with earnings growth rates of at least equal to the sum of current inflation and interest rates.

Lesson 9 - Prepare for reversals
2008 was almost universally bad from a news perspective. But in 2009, you can expect to see a more bipolar attitude in the markets: Fears of deflation versus inflationary concerns, as well as fits and starts of growth amid the malaise of an economic recession, will all keep policy-makers and investors on their toes trying to separate false alarms from the real thing.
The must-do for investors is to come up with your own view of economic conditions, remaining open to contrary data but realizing that conflicting information will make predictions difficult for a long while.