If you made bad decisions with your investments before the bear market came, you've paid the price over the past year. Yet as much as you may have wanted to sell stocks when everything was crashing down, we told you to stay calm, not to panic, and to avoid making any rash moves. So you've waited, wondering when the worst of the financial crisis would be over, for the moment when the market caught its breath and you could finally do something.

If you made it this far, congratulations. The panic's over. It's time to get back to work.

Protect your portfolio
Many investors let their investments get too risky during the bull market, which cost them more than they may have expected when stocks fell. Regardless of how you responded to the market's crash late last year -- and the further drops that came to a head with the lows in early March -- you're likely facing the same kinds of problems with your portfolio. Although the solutions may be different, the idea is the same: Do what you need to do to get your investment back in line with the level of risk that's appropriate for your financial situation and that matches your comfort level.

For these purposes, let's separate everyone into two groups: those who've made no changes throughout the crisis, and those who took steps to regroup and take advantage of cheap stocks when the opportunity presented itself.

If you did nothing
For many who battened down the hatches and stayed the course, the recent rally has granted you a reprieve. Although plenty of stocks are still well off their pre-bear market highs, they've turned in a pretty impressive bounce from what seemed like a potential death spiral. Take a look at some of these popular stocks:

Stock

Return, Sept. 30, 2007 to Feb. 28, 2009

Return Since Feb. 28, 2009

Wells Fargo (NYSE:WFC)

(63.6%)

102.1%

ConocoPhillips (NYSE:COP)

(55.6%)

29.6%

Deere (NYSE:DE)

(62.1%)

70.1%

Goldman Sachs (NYSE:GS)

(57.3%)

57.5%

Gap (NYSE:GPS)

(39.8%)

69.7%

Source: Yahoo! Finance.

The recession has certainly taken its toll on the financial, commodity, and retail sectors. But amid talk of green shoots and a potential economic turnaround, the stock market rally that has been raging for the past three months has given investors a nearly unprecedented opportunity to make the changes they so desperately wanted to make during the panics of last fall and winter.

So if you successfully kept yourself from panic-selling, now's your chance to adjust your portfolio. If the losses you suffered last year proved to you that your investing plan was too aggressive, cut back your exposure to stocks now -- before the next wave down begins and leaves you wondering why you didn't act sooner.

If you bought low
On the other hand, if you managed to do what everyone wishes they had done -- bought stocks at those lows -- then you may well have the opposite problem. With beaten-down shares like Citigroup (NYSE:C) and Ford Motor (NYSE:F) having tripled or more from those dark days in November and March, you may have a dangerously high concentration in those shares and may be wondering what your next step should be.

Just as you adjusted your portfolio at the lows, it's time to think about rebalancing again. I know that it has only been a few months, but when stocks jump 40% and bonds fall nearly 10%, that's enough to turn a 50/50 allocation into 60/40 allocation all by itself -- and that doesn't even consider the impact that even better-performing individual stocks may have had on your asset allocation.

It's true that by rebalancing again now, you may realize some short-term gains, which could cost you more on your next tax return. But having successfully navigated the bear market so far, you don't want to leave yourself overexposed if this rally reverses itself. That could undo every smart move you've made so far.

Get comfortable
The huge run-up in stocks we've seen over the past three months has done all of us a big favor. But rather than counting on your good fortune to continue, make sure to take steps now to build the best investment portfolio you can -- no matter what comes next for the markets.

Learn more about what to do now:

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