Lesson 2: Buy and hold works - eventually
lessons from the crash dow 040909
DJIA March 9, 2009

March 9, 2009: When the Dow fell to 6547 that day, stocks had already lost more than half their value. And equities wouldn't fully recover until 2013. So it may seem that investors who pulled $25 billion out of stock funds in March and $240 billion -- plowing that money into bonds -- over the next three years were on the right track. They weren't.

March 2009 marked the start of a bull market that saw stocks return 174% so far, vs. 25% for bonds.

Had you simply hung on to a basic 70% equity/30% bond strategy from Sept. 1, 2008 -- when things started to get scary -- you'd have earned more than 7.5% a year. That's not far off the 9% historical annual return for this mix over five-year stretches since 1926. Of course, you'd have earned that only by staying the course.

More takeaways from 2009

March 31: The price/earnings ratio for stocks, based on 10 years of averaged profits, falls to a generation-low 13.3. The moral: The price you pay for stocks is the single biggest determinant of future returns. Since March 2009, the S&P 500 has gained 22% annually.

October: U.S. unemployment rate peaks at 10%.The moral: Emergencies don't happen just to other people. Set aside six months of expenses in cash -- a year's worth if you're over 50, as your job hunt will take longer than a 30-year-old's.

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