With the damage done, now's the time to review portfolio

Damage has been done to investor portfolios in 2008.

There have been double-digit declines in domestic large-cap, mid-cap and small-cap growth funds, reflecting the stocks they own. Technology, telecommunications, natural resources and many foreign funds have endured comparable drops.

Meanwhile, money-market fund assets have hit a record $3.303 trillion as investors flock to safe and liquid assets.

Yields on the money funds have declined less than the yields on Treasury bills and commercial paper. They're also managed so investors get $1 back for each $1 put in, keeping the share price at $1.

If you can bear to look at your own portfolio, consider some repair work. Don't whine about the past, but go over holdings to see if you're positioned for current trends.

Discounted prices of large-cap stocks make them attractive right now. But resist the temptation to try to recoup money quickly by going overboard in foreign funds. They'll have difficulty living up to their outsized results of recent years.

"First, consider making lemonade out of your lemons," said William Stone, chief investment strategist for PNC Wealth Management, a member of the PNC Financial Services Group Inc., in Pittsburgh. "If you have unrealized capital losses and it makes sense for your tax situation, perhaps you should realize those (by selling) to help with your taxes."

Second, investigate opportunities to move toward quality investments, Stone said, because stocks of the best U.S. businesses are trading at big discounts to historical value.

"We recently upped our allocation to U.S. large-cap stocks, and so far so good, because the U.S. has been outperforming the EAFE (Europe, Australasia and Far East) stock index for the first time in six years," Stone said. "However, overall asset flows among general investors have been going to international equities because investors typically — and unfortunately — chase best returns of the prior year."

Investment is the only discipline in which people think there is more risk when prices have gone down, Stone said. He's advising his clients to stop overweighting foreign stocks and shift some proceeds to large-cap U.S. stocks.

Stone's strategy factors in the following:

• More rate cuts, with another 25-basis-point reduction at Federal Reserve policymakers' meeting in March, if not before;