Lesson 1: Don't bank on one sector
lessons from the crash nyse trading floor

September 15, 2008: The turmoil after Lehman's collapse was different -- and more frightening -- than the tech crash in 2000.

This time the stocks that took the biggest hits weren't shares of profitless startups. They were financial titans -- some more than a century old -- that produced a third of the market's profits and dividends. No wonder these blue chips were fixtures in many retirement portfolios.

The love affair is clearly over. Or is it? Financials have been the market's best performers since September 2011, posting annualized gains of 39%.

As a result, bank stocks, which made up less than 9% of the S&P 500 in 2009, based on total stock market value, now represent more than 17% of the broad market. That means they're probably among the biggest holdings in your stock mutual funds and ETFs.

To limit further exposure, stick with funds that focus on pristine balance sheets and consistent earnings, such as MONEY 70 fund Jensen Quality Growth (JENIX), where financials make up less than 4% of assets.

More takeaways from 2008

October 16: In a month when investors yank $71 billion from equity funds, Warren Buffett says buy U.S. stocks.The moral: You have to be willing to go against the crowd, and fund flows are a good contrarian indicator.

December 11: Bernard Madoff is arrested in largest Ponzi scheme and financial fraud ever. The moral: Investments that seem too good to be true are. Madoff also demonstrated the risk of letting a single fund manager or financial adviser oversee your entire portfolio.

Related: Prison exclusive -- Bernie Madoff can't sleep


  @Money - Last updated September 03 2013 05:24 PM ET
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