One such new concept is Lifestyle fund; an extremely diversified package designed to be single fund in an investor's portfolio.

There are two general types of these funds, in which assets are spread out across a wide range of stocks and bonds. In one, securities are held directly, in other, assets are held through other funds.

Fidelity's Freedom 2030 is an example of first type. It targets a specific retirement date, and cash and bond stakes rise as that date approaches.

This type of fund has created a perception among investors that its value will not drop and that it is safe. But, in fact, these are no safer than a standard mutual fund.

Since we sold all of our investment positions on October 13, 2000 and preserved our capital, Fidelity Freedom 2030 has lost 39% (through 2/21/03).

Do you think that's an isolated incident? I'm not picking on Fidelity, but here are some of their other Lifestyle funds with returns over same period:

Fidelity Freedom 2020: -34% Fidelity Freedom 2010: -22%

The shake out in stock market, which started in April 2000, had all major indexes coming off their highs, violently followed by just as strong rally attempts. The roller coaster ride was so extreme that even usually slow moving mutual funds behaved as erratically as tech stocks.

By October, markets had settled into a definable downtrend, at least according to my indicators. We sat safely on sidelines and watched unfolding of what is now considered to be one of worst bear markets in history.

By April 2001 markets really had taken a dive, but Wall Street analysts, brokers and financial press continued to harp on great buying opportunity this presented. Buying on dips, dollar cost averaging and “V” type recovery were continuously hyped to unsuspecting public.

By end of year, and after tragic events of 911, markets were even lower and people began to wake up to fact that investing rules of ‘90s were no longer applicable. Stories of investors having lost in excess of 50% of their portfolio value were norm.