Not a week goes by that I don’t hear somebody say: “I don’t really know what I’m worth. I have stopped looking at my statements.” I totally understand the urge to avoid unwelcome news. It’s part of being human.

Many investors seem to think the past 10 years were a waste. Early in 2008 the Wall Street Journal declared the years since 2000 “the lost decade.” That, of course, is one possible interpretation of the market’s behavior since it peaked in 2000, stumbled through a severe bear market for about three years, roared back to recovery and then fell into its current slump late in 2007.

UPDATED THROUGH 2008!

Perhaps the biggest job that any investor has is managing risk. If you take too much, you could be flirting with disaster; if you take too little, you could cheat yourself out of the returns you need to take care of yourself, your family and your heirs. In this article, updated to include results from 2008, Paul Merriman shows how to get this important equation just right.

Almost all investors will be glad that 2008 is coming to a close.

The bad news is well known.

•    The combination of too much leverage and excessive speculation in the financial and housing sectors has depressed global asset prices more than any time since the Great Depression.
•    Several major financial institutions couldn’t survive; for others, including the Big Three U.S. automobile manufacturers, the future is uncertain.
•    The country is in the midst of tough recession which began in December 2007.
•    Worries are widespread concerning retirement, jobs, housing and the long-term economic health of the nation.

And yet, even in these hard times, there are good reasons to be hopeful.

As winter and a new calendar year arrive, investors are struggling tomake sense of the market and what to do. Many investors are content, ifonly barely, to stick with tried-and-true wisdom and long-termstrategies. But other investors think (or hope) that they can figureout what the market will do and how to take advantage of it.

A crisis that started in Seattle is likely to spread across the country in the coming months as thousands of Washington Mutual employees come to grips with the money they lost because they held the bank’s stock in their 401(k) accounts. That stock became worthless when the bank failed late in September.