The year 2000 will be recalled as a bad one by many investors. But, ironically, 2000 has been a good year for long-term investors, if not for speculators. Why? Because it has had a sobering impact on rampant and unhealthy market euphoria and has exposed the dangers of overactive trading and excessive risk taking.

Many lessons can be learned from the year gone by, but the following five stand out as paradigms of investment sense:

MAINTAIN A LONG-TERM PERSPECTIVE
Some investors experiencing losses this year for the first time (or less robust gains than they had expected) may be discouraged. Forget 2000. If you are like most Americans, you're investing for retirement in 2010, 2020, or 2030.

Investing is a marathon, not a sprint. Once you reach retirement, you'll care little whether you won the race in any given year. But you will take satisfaction in crossing the finish line by achieving financial security for your golden years.

IGNORE RECENT PAST PERFORMANCE
While you may be tempted to buy yesterday's winners, this is frequently a loser's game. With the benefit of hindsight, we now know that the majority of investors who piled into technology funds did so too late to reap big returns. Consider that the return for the Lipper Science and Technology Fund category was a spectacular 108% from December 31, 1999, to October 12, 2000. But by examining the cash flows into these funds and calculating (with some estimation) the dollar-weighted performance of that group over the same time period, one can see that the returns investors actually earned were a far more modest 8%.

And these cold, hard numbers do not show how real people are losing real money by chasing past performance. An investor wrote to me in early 2000 saying he could no longer endure the poor performance of his value fund, which was down 17.5% in the prior six months. He moved $25,000 into a small-cap growth fund, which was up 48% in the same period. His timing could not have been worse. Over the next six months, his balance dwindled to $21,000. Simply by staying in the value fund, he would have seen a balance of $29,000 - a 38% difference!

TUNE OUT THE "NOISE"
There has been no shortage of market hype - on television, in ads, and in online chat rooms. Some financial services firms even say you need a beeper to stay abreast of minute-by-minute activities in the market. My advice: Do not react to daily market news and hot tips, which can lead to impulsive and counterproductive investment changes.

DIVERSIFICATION STILL MATTERS
The bull market led some investors to forgo the benefits of a broadly diversified mutual fund to pursue the siren-song rewards of individual stocks. This, too, is not without big risk. Consider that nearly 48% of the stocks in the S&P 500 posted negative returns for the first three quarters of 2000, compared with just 29% of domestic stock funds.

MINIMIZE TRADING ACTIVITY
In 1999, investors held a mutual fund only two years on average, compared with the 10-year holding period just a few years ago. That is definitely not an improvement. The Internet has made performance shopping far too easy; worse, the Web has made it possible to buy yesterday's short-term winners today. Guard against the temptation to trade frequently.

Two professors from the University of California studied the behavior patterns of investors before and after they began trading online. While portfolio turnover rate grew by 30%, investment performance declined, falling a full three points behind the market. Over a lifetime of investing, that could cost an investor three-quarters of a million dollars of returns on a $10,000 initial investment.

Yes, 2000 will be remembered as a tough year for investors' wealth and psyches, but it also provided invaluable lessons for the future. Remember philosopher George Santayana's warning: "Those who cannot remember the past are condemned to repeat it."