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;

• A decline in money-market rates that makes stocks more attractive;

• Bad economic news that should gradually improve as the Fed's moves take hold on the economy;

• Strong overall fourth-quarter earnings averaging low-double-digit year-over-year growth, excluding financial firms.

Some investors are already bargain hunting in bank and brokerage stocks decimated by subprime woes, in the belief prices already take into account the worst. Such moves are strictly for the brave. Citigroup (C) and Merrill Lynch (MER) are often mentioned, yet conservative advisers believe the hazy scenario must clear up more.

"Investors had grown complacent the last few years because there wasn't a lot of market volatility, but they're not complacent now," said Mark Brown, certified financial planner and managing partner for Brown & Tedstrom financial planners in Denver. "Volatility can be your friend, allowing you to buy on dips and get much better prices."

Like Stone, Brown favors a shift toward large-cap stocks. Continue to own foreign stocks, he said, but don't become "over-enamored," because past returns were linked to a declining U.S. dollar.

Brown recommends two large-cap growth funds whose portfolio holdings are down in price:

• The $2.8 billion Marsico Growth Fund (MGRIX), down 11 percent this year, with five-year annualized return of 13 percent. Largest holdings include big-cap stocks McDonald's Corp., UnitedHealth Group Inc., Goldman Sachs Group Inc., Monsanto Co. and Apple Inc.

• The $11.4 billion Janus Fund (JANSX), down 10 percent this year, with a five-year annualized return of 12 percent. Largest holdings include Microsoft Corp., Hess Corp., InBev, CVS Caremark Corp. and Exxon Mobil Corp.

Both are "no-load" (no sales charge) funds with minimum initial investment requirements of $2,500.

"A portfolio is damaged when it isn't diversified or when it doesn't correlate with your goals, but it isn't damaged just because it is down in value," said Marilyn Capelli Dimitroff, certified financial planer and president of Capelli Financial Services Inc., Bloomfield Hills, Mich., who believes the best course is often to do nothing. "Values fluctuate but unless you're going to use the money in the short term, it is basically just a fluctuation."

If you are globally diversified and don't need cash anytime soon, relax, she said. If not, you may need to fix your holdings.

Capelli Dimitroff advises that you ask these questions about your portfolio:

• Is it diversified between stocks and bonds, with that mix dependent on your goals and ability to tolerate volatility?

• Does the stock portion have small- and large-cap U.S. stocks in several investment styles, such as growth and value?

• Does it include foreign stocks, both developed-country and emerging markets?

Examine all investments to see if they still fit your objectives and risk tolerance. In mutual funds, check whether a fund changed managers or investment style since you bought it and compare performance in relation to its peer group. Amid recession concerns, this is a year to know exactly what you own.

Andrew Leckey answers questions only through the column. Address inquiries to Andrew Leckey, P.O. Box 874702, Tempe, AZ 85287-4702, or by e-mail at andrewinv@aol.com.