Don't let regrets over last year's mutual fund losses dictate your investment strategy. By Jeffrey R. Kosnett, Senior Editor February 28, 2009 OUR READERWHO: Sandy St. John, 54 WHAT: Owner of microwave path-surveying business WHERE: Forney, Tex. SYMPTOM: Wants to recoup last year's losses, then return to safety of CDs.If her one-woman business goes bust because of the recession, Sandy's investing mishaps will be just a footnote to her life story. For now, it looks as if the business will survive. Sandy, who responds to client emergencies in her own airplane, is more concerned about insurance costs and delays in getting paid than about losing customers. But those investment losses are irksome for someone like Sandy, who is single and the sole source of her long-term financial security. A year ago, Sandy moved $51,000 from a maturing certificate of deposit in her IRA to some Hartford mutual funds that are now worth only $30,000. Yields on CDs were pitiful at the time, but she now thinks that she and the broker she consulted should have anticipated the market crash. Sandy would like to wait for her funds to break even and then return to CDs. She also holds a few dividend-paying stocks, mainly in oil and gas, that are way down, too. She's leaving them alone. The idea of recouping your losses and then quitting the game is hardly unheard of, and not just in poker. "I used to be a currency trader, and it was common to say that if you had a bad position, you would hold it until it was flat," says Morris Armstrong, of Armstrong Financial Strategies, in Danbury, Conn. "But if things are turning around in your favor, why sell then?" If Sandy's funds recover their losses within a reasonable length of time, says Armstrong, it means that the economy and the markets are getting healthier, so it wouldn't make sense to sell. Eventually, after stocks have recovered and become pricey, Sandy will want to pare her holdings. But right now her plan seems arbitrary. Advertisement With stocks behaving better, this is also a good time to face up to your emotions over last year's losses. "The best money managers got this one wrong," says Connie Stone, of Stepping Stone Financial, in Chagrin Falls, Ohio. Stone says people who are self-employed, single, widowed or divorced are particularly frightened by losses and often react by wrapping both arms around what's left. Stone would prefer that Sandy increase her IRA contributions in 2009 or set up an individual 401(k), with an emphasis on stocks. Sandy's mutual funds are decent. She holds Hartford Capital Appreciation, which has a fine long-term record; a fund that tracks the S&P 500; a small-company fund; and some bond funds. To ask her broker to select different funds (and possibly generate a fresh set of sales charges) won't help Sandy much, if at all. No one can predict with certainty what will happen in 2009. What we do know for sure is that last year's savage losses make quality stocks and most bonds cheaper and, presumably, more attractive. So whether you're angry, scared, frustrated or just a-wishin' and a-hopin' for better times, you have nothing to gain by rehashing 2008. Stumped by your investments? Write to us at email@example.com.