What a difference a year can make. Last year around this time there were headlines calling for a second depression, a stock market heading for 3,000 on the DOW and a complete collapse of the banking system. Investors smart enough to be contrarian and put money back to work while stock prices were low are celebrating now.

It is difficult to go against the grain and invest when the consensus is to bail. Clearly the markets faltered to the point where long-term investors, including Warren Buffett, just could not resist the bargains. Perhaps this is a lesson worth revisiting.

It is important to take a bird’s eye view of investments when emotions are running the decisions. By stepping back and looking at the historical trend lines, the low stock valuations in the spring of 2009 were virtually unprecedented. However, that does not mean investing at that time would have been a good idea for everyone.

Developing a good strategy for short, intermediate and long term goals is crucial before you jump into any purchase. Once that is in place and you have reviewed your options with an objective advisor, you can better determine how to get back on track.

The logical place to start is with very long-term investments such as a retirement plan or a 401k account. This is easy to invest in through your payroll deduction and also allows for you to gradually invest with small amounts each paycheck. Therefore you have less risk of a whole year’s contribution sliding backwards when you were dollar cost averaging during all different market cycles.

Next take a look at old IRA accounts that are no longer being funded but may need to be rebalanced. This may be true of Roth IRAs as well which usually are considered the last money you would spend due to the tax-free status. Most retirees will leave Roth’s alone for as long as possible to benefit from more years of tax free growth. Also if the Roth ends up as an inheritance, the tax free status compounds for the beneficiary as well.

Taxable investments such as those held outside a retirement account can also benefit from a fresh look during or shortly after a recession. You may be eligible to take a tax loss on assets you no longer want in your portfolio which allows you to make adjustments without a large tax bill next April.

College funds should also be reviewed based on the year your student will need the money. Keep in mind some parents are letting the 529 plans continue to compound for 2010 and deferring distributions to a later year if other assets are available to pay for college expenses currently. If you need the money next semester then it is better to be rather liquid on that portion of the account. But if you don’t need it for several years, then compounding with the recovery may help the balance grow.

It is important to always review your accounts as part of your overall financial plan and risk tolerance. What works for your co-worker may not be the best advice for you. Use this recovery as an opportunity to take a fresh look at all of your goals and assets and build a good strategy to help you get back on track.

Patricia Kummer has been an independent certified financial planner for 23 years and is president of Kummer Financial Strategies, Inc., a Registered Investment Advisor in Highlands Ranch. She welcomes your questions at www.kummerfinancial.com or call the economic hotline at 303-683-5800. Any material discussed is meant for informational purposes only and not a substitute for individual advice. Investing is subject to risks including loss of principal invested. Rebalancing and dollar cost averaging may or may not produce positive results.