Even as the economy and the markets are recovering, many clients are sitting on cash and feeling pessimistic about stocks. Few realize that investors with diversified portfolios who rode out the crash actually owned slightly bigger portfolios at the end of 2010 than they had at the peak of the market in 2007.

"Don't get me wrong, all is not rosy, but the reality is certainly different than the perception of total damage done to portfolios," says Natalie Miller, consulting director of private client services at Russell Investments. "Our human nature is to focus on bad news."

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