In the late 1990s, I invested in a tech fund. After the market fell, I moved what was left into a savings account. What should I invest in now?

QUESTION: As a young 20-something in the late 1990s, I invested $5,000 in a technology fund and put in an additional $500 per month. As the bubble burst, I lost a considerable amount of money, before yanking what I had left out of the market. I'm now 29 and have all of my money in a savings account. What's a good fund to invest in now?

-- Anonymous

ANSWER: So you've made some mistakes: You chased returns and were burned. Then you sold at a loss and went to the opposite extreme -- cash -- despite an investment horizon that's probably quite long. In short, your moves over the past few years could be viewed as a lesson in how not to invest.

But as Tony Soprano would say, fuggedaboudit. "What's done is done," says certified financial planner (CFP) Norman Boone, president of Boone Financial Advisors. "Other than learning lessons, you probably shouldn't dwell on it too much." So rather than focusing on what's been lost, now's the time to establish a better strategy for the future.

And keeping your stash in cash isn't it.

Your first step should be to determine your ideal asset allocation (that is, the correct balance of stocks, bonds and cash). This is based, among other things, on the investor's age, investment horizon, volatility tolerance, economic outlook and portfolio size. Younger investors obviously have a very long investment horizon when saving for retirement -- but are often balancing this goal with more immediate ones, such as saving for a home or establishing a college fund for their young kids.

Once an investor has a sense of how to allocate his or her portfolio, it's time to start looking for some good funds. Broadly speaking, this means finding a fund with consistently good performance and low fees. What this doesn't mean is that an investor should pick the year's top performing fund in a specific category, notes Boone. Those funds usually have an investment strategy that's the flavor of the moment, or some big stakes in some very lucky picks.

Instead, investors would be better served searching for funds that have performed well over several time periods -- such as the past one, three and five years (annualized). Index funds can also be a good way to get broad diversification at low cost. Once a good fund has been found, it may make sense to dollar-cost average into the fund to avoid buying at a market peak, says CFP Scott Kahan, president of Financial Asset Management.

Of course, even a well-balanced portfolio is going to suffer during a dramatic market downturn like we've seen over the past two and a half years -- although it's unlikely to suffer nearly as much as an undiversified one. Nevertheless, those saving for a short-term goal should be invested conservatively enough to minimize potential damage. Those with a long investment horizon, however, should simply view a falling market as another opportunity to buy, says Boone.