It may be an understatement to say this, but 2008 was a very tough year for the United States stock market.

The incredible 800-point losses and 700-point gains all in the same day were unprecedented. And for people invested in the market to earn money for a retirement nest egg, the loss of 20, 30 or even 50% of an investment portfolio is painful and frightening.

The inclination for most people is to rush out and divest themselves of mutual funds, stocks, bonds and the like. But don’t do that until you’ve done a very careful analysis of what is going on with your individual investment portfolio, advises Lee V. Bethel, a chartered financial consultant and member of the African American Association of Financial Advisors.

Bethel said you may find that while your investment portfolio lost 30% of its value, for example, the indexes such as the Standards and Poors 500 (S &P 500) or the Dow Jones, lost much more.

But when you do the comparison, be aware of this, cautioned Bethel: “Everybody gets very concerned about how well the Dow did yesterday or whatever day it is, but only 30 companies make up the Dow. A lot of people don’t own the (Dow) stocks.”

If that is the case, you have much less to worry about added Bethel, who suggested getting an understanding of what stocks are in your portfolio, and then comparing their performance to that specific index. The S & P is composed of 500 large cap (capitalized) company stocks such as Wal-Mart, Microsoft or General Electric. The Russell 1000 index measures the performance of the large-cap segment of the U.S. equity universe and is a subset of the Russell 3000® Index. It includes approximately 1,000 of the largest securities based on a combination of their market cap and current index membership. The index also represents approximately 92% of the U.S. market.

Bethel said once you know which stock classifications your portfolio falls into, the comparison is more accurate.

“But you can’t just look at the performance for a year,” noted the advisor. “How did it do over the last three years? The last five years? If it consistently has not been performing better than the index, then maybe you need to be in something else or buy the index.”

Buying the index means you purchase a mutual fund containing all the companies in the S & P 500 for example.

“You can also buy an Exchange Traded Fund (ETF),” explained Bethel. “. . . An ETF is going to be cheaper, but it’s more like a stock rather than a mutual fund. It does not have a manager. . . An ETF is passive management. If you want to manage it yourself, you’ve got to sell it.”

In comparison, Bethel said a mutual fund has a manager or management team that can buy companies at certain times. They typically do not invest in all the stocks in a index; but perhaps the top 15.

Getting started on this process is simple, said Bethel. Just take your head out of the sand and open any and all communications you receive involving your investments. That is the only way to know what next step to take.