NEW YORK (CNN/Money) - Since the market began its slide, my 401(k) has dropped from $80,000 to $34,000. What should I do before it's all gone?

-- Maryann House, Harrison, Arkansas

If it's any consolation, you're not alone -- I have been deluged by mail from people in similar positions. I wish there were some surefire strategy or formula I could recommend that would help investors recoup their losses and get their financial lives back on track.

But many investors are in trouble precisely because they believed they had hit upon a surefire strategy for becoming wealthy. So I'm not about to compound the problem by recommending some cockamamie scheme that involves moving money into a safe haven like T-bills or gold with the idea of pouncing on stocks when they begin to recover. Nor am I going to suggest loading up all your money in one sector that might or should or could rebound the fastest.

What I will do, however, is propose a way for you and other investors in your situation to come to grips with what's happened and to plan sensibly for the future. Basically, I'm talking about a three-step process:

Yes, you say you've lost $46,000 in your 401(k), but I want you to try to gain some insight into why you lost so much. Where did you incur the losses? Was your account diversified, or did you skip bonds, figuring they were too fuddy duddy-ish? Were your stock holdings broadly diversified by size (small-, mid- and large-cap) and style (value and growth) and sector (retail, energy, utilities, etc.)? Judging by the magnitude of your loss I'm figuring you must have had a big chunk of your money in some pretty aggressive stocks or funds.

Sure, the glib answer here is, "Back where I was before all hell broke loose." But what I mean is this: Knowing what you know now about investing risk, about how far the market can fall, and how long it can stay down -- we're talking more than two years at this point -- how should your money be diversified? And within the stock portion in particular, how much should be allocated to more volatile growth sectors vs. somewhat less flighty value areas?

And do a gut-check: Back in the go-go '90s people said, "Sure, there'll be setbacks. But I'm a long-term investor. I've got the guts to hang in for the recovery." What we've found is that it's one thing to say during a bull market what you'll do during an extended bear market and another thing to do it when the bear actually hits. Hypothetical losses are much easier to bear than real ones. In a long tough bear market like this, even the brave cave.

Tools you can use       Our Asset Allocator can help you arrive at a mix of stocks, bonds and cash that makes sense for you.

I don't say this to chide or reprimand. Look, it's human nature to be a bit over-optimistic when the good times are rolling. Who carries an umbrella on a sunny day? But now that you know what the pain of a bear can be, you should structure your portfolio so that it realistically reflects your tolerance for riding out an extended downturn. Maybe 100 percent stocks really isn't the right "allocation" for you. Maybe it's 80, or 70 or 60 percent. Maybe it's even less, especially if we're talking about money you're going to need in the next few years.

That said, be careful you don't just go from one extreme to the other. Don't let the recent losses force you out of stocks completely, especially now that stock prices have really been hammered down. Most of us need growth in our portfolios to accumulate enough money for goals like retirement and funding our kids' education.

I have no idea when the market will bounce back, but since I don't believe the U.S. economy is headed for economic oblivion, I assume it will at some point. I know it's hard to think favorably about stocks given the current downturn and all the bad news about accounting frauds and corporate governance and what not. But it's not as if we haven't had such problems before and recovered from them. If history is any guide, it's a good bet that over the next five years or longer, stocks will turn out to be better performers than bonds. So I would still have the bulk of my money in stocks -- and invest new money in stocks -- although I certainly wouldn't expect a return to the irrationally exuberant returns of the 1990s.

Once you decide how your money should be invested, you can begin making changes. In all likelihood, this means you're going to be doing some selling in areas where you're overweighted -- tech stocks, perhaps, or stocks overall -- and putting the proceeds into areas where you were light or had no exposure at all -- bonds, maybe some small-cap and value stocks.

From MONEY Magazine       When to sell

Don't just begin selling indiscriminately. First, in the case of funds, you should check performance. Has a fund's losses been in line with those of funds with a similar strategy, or has it done far worse than its peers? Generally, funds that have performed poorly relative to similar funds would be the first ones to go, although if you're doing a major overhaul of your portfolio, you will probably also have to sell some funds that have done as well or even better than their peers.

To compare a fund's performance relative to that of its peers, check out the category performance info at Morningstar. When it comes to stocks, you've got to decide whether, given their current prices and their future prospects, they're still worth holding. That's always a tough call, although if you go to our Investor Research Center and our Company Research section, you can begin collecting information that will help you make a decision.

If you're dealing with a tax-deferred account like a 401(k), you don't have to worry about the tax ramifications of your buying and selling. If you are re-jiggering a taxable portfolio, however, taxes become an issue. So if you end up having to sell some stocks or funds in which you have gains, for example, you might also want to sell some stocks or funds in which you have losses. You can then use the losses to offset the gains. And, in the entirely likely event that you don't have any gains to offset losses, you can always apply up to $3,000 in losses each year against ordinary income from wages and the like.

One more thing: if you have both taxable and tax-deferred accounts, you may be able to make most of the changes in your tax-deferred account to avoid triggering taxes. So, for example, if you've got to lighten up on tech and you have sizeable positions in both a taxable account and a 401(k), consider selling the tech in your 401(k) and using the proceeds to invest in whatever asset you need to diversify your portfolio.

So there you are. No secret formulas. No predictions about when this market will bottom out and when it will turnaround. No prognostications about what sectors will provide the best gains in the months and years ahead. Markets in general and this market in particular are too uncertain to make worthwhile predictions. But just because we face uncertainty doesn't mean you can't plan. And, in fact, the more uncertain things are, the more important it is to have one. So your gains may be gone. But at least you've got a reasonable plan to face the future.

Walter Updegrave is the author of Investing for the Financially Challenged and can be seen regularly Monday mornings at 8:40 am on CNNfn.