A more sensible course of action to tame risk and still seek the potentially higher long-term returns of stocks is what Dalbar calls the "time-honored tactic" of dollar-cost averaging, or investing the same amount of money at regular intervals. This strategy does not assure a profit but guarantees you buy more shares when prices are low and fewer when they are high.
"Dollar cost averaging allows investors to slowly make their way back into the markets, and can even make market swings work to their advantage," the Dalbar study said.
For example, the average investor moving in and out of stock funds would have seen $10,000 of total invested principal grow to $13,646 over the 20 years ended Dec. 31, 2008. But somebody faithfully investing $41.67 every month -- also $10,000 total -- would have accumulated $17,037.