Unfortunately, investing for retirement often comes with a mandatory requirement for holding equities or other higher-volatility securities in one's portfolio. This is often the "risk component" as it allows for tremendous longer-term gains, but also posses the risk of loss or variable fluctuations. And for investors who have been actively investing for retirement over the past several years, the risk value of their portfolios was put to the test from 2007 through the first quarter of 2009.

A couple of things would have happened to those investors as they watched helplessly while their portfolios lost upwards of 50% of their value. The first was that they would need to make some compromises in terms of their retirement goals and objectives. That means either accepting a reduced retirement lifestyle or pushing retirement out by a decade (or any other time) so that they could make up the losses. The second and more meaningful realization would have been that they had a new appreciation for what risk tolerance really means and a lot of investors with an improper asset allocation would have assumed they needed to be more conservative and immediately switched to more conservative investors.

In reality, investors should have taken a more logical approach to the market correction. This means evaluating their end-goal (e.g. maybe I can't retire with an income of $80K per year or, maybe I can't retire at 55 like I wanted) as a result of their reduced risk tolerance. But this need not necessarily be the case, especially if their true risk tolerance had remained the same.

The reality is that if someone has a particular investment goal, there are two options they have if they want to stay on track and both of them involve the word "aggressive."

The first is that they need to contribute more aggressively to their retirement savings account. And this makes sense, particularly while many growth-oriented securities remain cheap since it allows investors a once-in-a-lifetime opportunity to buy greater quantities ahead of the next market expansion.

The second is to actually take on more risky investments, especially if their risk tolerance supports it (e.g. it has not changed since prior to the 2007-2009 market correction). And what many investors are realizing now that the market has recovered to some degree is that their risk tolerance might have indeed remained the same if they had not bought into the "doom and gloom" of the moment.

Ultimately, investors should re-evaluate their tolerance for risk and obtain a fresh asset allocation model, as recommended by their financial planner or elsewhere. This will give a better idea of how much they should invest in each asset class and, in particularly, the type of risk they should be prepared to reasonably expect.