A generation of investors began the New Year wiser but poorer courtesy of the global financial crisis of 2008.

The lessons of last year are likely to reverberate for many years to come. So it is worthwhile to capture the key lessons - while painfully fresh - as a useful reminder for portfolio reviews in the years ahead.

Lesson 1: Risk is not to be under rated.
In the good times we cannot be complacent about risk. It may have taken market events the likes of which we haven't seen for 70 years to demonstrate it but when risk cannot be accurately priced basically anything can happen. Past performance and valuations are rendered irrelevant at that point. Just ask investors in any of the major US investment banks.

Lesson 2: Markets are powerful forces
The events of 2008 surely puts beyond doubt the notion that as individual investors we can somehow outsmart and swim against market currents.

In a year when it seemed most accepted investment approaches failed to deliver the importance of your asset allocation decision was underscored in red ink.

Clearly how much you have in the various asset classes is the most important decision you make. The corollary to that is the need to be disciplined and rebalance around your target asset allocation to make sure overconfidence and risk does not creep up with buoyant markets.

Lesson 3: Invest in what you understand.
Innovation became a dirty word in terms of investment products. Engineered products like mortgage-backed CDOs were claimed to lower risk by diversification- they actually built a pyramid of systemic risk that ultimately came crashing down on the very people who developed them. They were exposed as wealth creation vehicles for investment bankers simply interested in selling more and more and therein lay the seed of the boom's bust. Investors are entitled to ask how so many smart people got it so wrong: greed and hubris surely were a major part of the answer.

The promises hedge funds and alternative assets generally were exposed and did not deliver on the promises and industry estimates are that around 30% of US hedge funds will shut this year. The lack of transparency and regulation (particularly in the US) meant that many investors did not understand what they were investing in.

Lesson 4: Liquidity is worth something
When credit markets seize up suddenly the value of liquidity is understood and appreciated.

Lesson 5: Ignore the fixed interest markets at your peril
Our willingness to invest more and more of our portfolios in growth markets and shun the unexciting fixed interest world was probably the single biggest mistakes most investors made in the years leading up to 2008. Although the initial impact of the liquidity crisis also affected fixed interest market spreads when the crisis first hit by year end spreads had settled down to more normal ranges. Most impressively investors in high quality fixed interest investments earned double digit returns in 2008 - for example using Vanguard's Index Diversified Bond Fund which invests in 40% Australian fixed interest and 60% international fixed interest as a proxy for fixed interest markets investors earned 11.4% for the year.

It is perhaps salutary to turn back the pages of history and remind ourselves that 50 years or so ago the common investment practice was to have the majority of assets in fixed interest bonds and a small speculative portion in shares. The old-fashioned 1950s approach does not look quite so silly anymore.

Lesson 6: Gearing goes both ways
The most telling sign of over confidence in the ability of equities to deliver long-term returns was the level of gearing or borrowing some investors - with the urging of some advisers -took on.

The combination of borrowed money to buy highly geared products has proven the saddest litany of the 2008. This is also goes to lesson 3 - some of the most "innovative" product developments wrapped up multiple layers of gearing with catastrophic consequences.

Lesson 7: Have a long-term financial plan
If ever there is a year that the financial advice industry has the opportunity to demonstrate its value it ought to be 2009. Strategic asset allocation, risk assessment and portfolio construction are areas where investors will value - and now understand the need - for good advice.

Sadly, the financial planning industry has an ability to shoot itself in the foot. If it were a soccer team it would probably lead the scoring averages for own goals.

The unraveling of the Storm financial gearing model is likely to give the industry its latest black eye.

But there is a need to separate the industry's reputation from the individual adviser. Client feedback and market research has shown over many years that where people have an adviser they trust they give their adviser high scores on client satisfaction criteria.

Having a written financial plan is a powerful way of maintaining a portfolio review discipline while making sure the long-term goals are not lost in the emotion of short-term market movements.

A financial plan is the compass to help navigate the storm.