What you can learn from the last financial crisis

Lessons that will help you with the next one

WASHINGTON, D.C. » Ten years ago, a lot of people panicked.

Lehman Bros. filed for Chapter 11 bankruptcy protection on Sept. 15, 2008. It was an epic end to a stalwart Wall Street company.

And in the aftermath of Lehman’s collapse, many investors wanted out. They understandably decided to sell their individual stocks or get out of stock funds, because they couldn’t stomach the downturn in the market. The fear was real.

We couldn’t have known back then that the stock market would roar back, and that those who stayed steady would recoup their losses and then some.

Personal finance site NerdWallet recently conducted a survey on how Americans feel the Great Recession has financially impacted them a decade later. Thirty-eight percent said they are more afraid to invest in the stock market.

I invited readers to reflect on their choices during the financial crisis.

Lawrence from Detroit bolted from the stock market. When it dived, he switched some of his money out of equities.

“In retrospect, this was a mistake,” he wrote. “I sold low after having bought high, instead of the other way around. I would have been better off if I had done nothing. Still, I retained enough in equities that I recovered nicely and eventually zoomed ahead. And having a stash of safe investments gave me peace of mind. If there is a market downturn — say, in the first or second quarter of 2019 — my plan is to stand pat.”

Ellen of Patterson, New York, said she didn’t panic. “I stayed in the stock market. After four years, I was back to where I was before the crash. I’m very glad I stuck it out, because I’ve tripled my retirement savings since 2010.”

One reader pondered, “What about seniors who didn’t have 10 years to recover their losses?”

Douglas and his wife were 60 when the financial crisis hit. They were thinking about retiring.

“After [the] meltdown, we stayed put in our jobs and didn’t sell off for cash,” he wrote. “In January 2009, we sold off stocks in taxable accounts, racked up sizable paper losses, then immediately bought back in to lock in capital losses. Six years later, our new financial adviser said we were one of the few of his clients who took capital losses and bought back in.