He began with a reasonably diversified portfolio but the red-hot tech sector quickly drove his tech weighting to more than half of the value of his RRSP.

The ensuing meltdown has brought his tech stocks back down to around 20 per cent.

"It was exciting going up but scary coming down," says Mr. Barkwell, who has a six-figure portfolio and is currently getting his real-estate broker's licence.

"When all the talk is strong, and the markets drop anyway, that is a very scary feeling."

From this experience, Mr. Barkwell has learned some hard lessons: be cautious, be more diversified, don't get too emotional about the market gyrations and be prepared to sell.

He's also learned to accept some losses as a part of the investing game, but he's determined to move on with a revised plan.

As Mr. Barkwell's experience suggests, investors who choose to stock up their RRSP with equities require a particular discipline, a prudent approach -- and avoiding losses as much as possible.

"While gains in your RRSP account are not taxable, losses cannot be offset against other income," says John See, vice-chairman at Toronto-based TD Waterhouse Group Inc. "Investors should buy into companies that they feel have good long-term potential. They should also feel their capital is relatively safe."

Because losses cannot be offset inside an RRSP, Mr. See recommends keeping riskier, speculative stocks in a cash account.

Specifically, he urges investors to focus on companies that have good growth prospects, are well capitalized, have strong credit ratings, and attractive dividend yields. In general, firms that match these criteria include utilities and financial-service institutions.

"What are the overall objectives of your RRSP?" says Mr. See. "For most people, it means saving for retirement. Match the security with your objective -- that is, invest in stocks with long-term potential and viability."

Patrick McKeough, Toronto-based editor of The Successful Investor newsletter, echoes that advice. "Only buy well-established companies for your RRSP -- those that have some record of profitability, if not dividends," he says. "If none of them pay dividends, you're taking a lot of risk. But if two-thirds pay dividends, you're not doing too badly."

Finding those stocks is no easy matter. But investors can get guidance from full-service brokers, or search the Web sites of discount brokers or those offered by the media such as The Globe and Mail's globeinvestor.com site.

These sites offer a range of investment-screening tools to help choose stocks on the basis of dividend yield, for instance, or price volatility. Full-service and discount brokers will also provide individual stock reports.

Diversification is the key, says Mr. McKeough. He believes investors should pick stocks from five key economic sectors: financial services, utilities, consumer, resources and manufacturing. Companies should be prominent in their industries, although not necessarily leaders.

By spreading assets across various sectors you can minimize the pain in those areas that do badly. "Putting your money into 10 tech stocks is not diversification. The people who bought a bunch of tech stocks got killed in the recent market setback."

So what are stock pickers and analysts recommending in 2002?

Diversification has its merits, but timing also has a role to play. That is, depending on the economic cycle and market conditions, some stocks may deserve greater emphasis than others, says Norman Levine, vice-president and senior investment strategist at Toronto-based BMO Nesbitt Burns Inc.

"Right now, we are emphasizing early and coincident cyclicals that reflect what is currently happening in the economy," he says. His firm is favouring auto parts, banks, building products, retailers, real estate, transportation, cable and life insurance. Among favourites is CP Ships Ltd., an international container-shipping firm spun off from CP Ltd., and The Jean Coutu Group Inc., which has a network of 250 franchise drugstores and 320 corporate drugstores.

Kate Warne, Canadian market strategist at St. Louis, Mo.-based Edward Jones, is favouring stocks in three areas: financial services, technology and consumer staples. "While we think the market as a whole is moving up, the sectors that lead will be different from those in past rebounds."

One of her favorite names is Royal Bank of Canada. Celestica Inc. is another pick.

Brad Willock, a Toronto-based analyst and U.S. portfolio adviser at RBC Investments, a unit of RBC Financial Group Inc., expects a muted recovery in 2002, largely because consumer spending has maintained its pace through the recession.

He favours areas such as healthcare and financial services.

One top pick is Biovail Inc., a pharmaceutical firm.

He also likes Sun Life Financial Services Inc., a leading insurer which also has a major stake in Masschusetts Financial Services.

For his part, Mr. Barkwell has split his and his wife's total portfolio of 20 stocks among five industry groups, and holds telecom names such as Telus Corp., tech firms such as Celestica Inc., and healthcare firms like Johnson & Johnson.

"We have 2002 sorted out," says Mr. Barkwell. "We have done our research, chosen our stocks and repositioned a bit. We're just waiting for the economy to reward us."