The bear market of 2008 was a game-changer for many investors. Prior to 2008, a market decline of staggering proportions was a philosophical idea. The Great Depression was a distant event that few people alive today were even around to experience it - and most them were so young when it occurred that it had little or no impact on their personal investment portfolios. (Remember, the 401(k) wasn't even introduced until 1978, so even the Great Depression did little to derail the retirement dreams of the average investor.) Now that we've lived through a stock market decline in 2008-2009 that not only wiped out a decade's worth of growth but also changed the face of Wall Street forever, what have we learned? Here we look at the top lessons.(For more, see What Caused The Great Depression?and other lessons in finance from 5 Lessons Monopoly Teaches Us About Finance And Investing)

1. Risk Matters
Clearly, the amount of risk taken in one's investment portfolio will capture a significantly greater degree of attention in the years ahead. The decline of 2008 taught us that once-in-a-lifetime events can occur. We've also learned that diversification means more than just stocks and bonds. The simultaneous decline of stocks, bonds, housing and commodities is a stark reminder that there are no "sure bets," and that a cash cushion could save the day when times get tough. The blind pursuit of profit with no thought to the downside is a strategy that failed spectacularly.

Moving forward, investors should learn to be leery. Protecting what you've got is just as important as trying to get more. Keeping one eye on risk and the other on growth is a lesson worth remembering.

2. Experts Don't Know Everything
We put a lot of trust in experts, including stock analysts, economists, fund managers, CEOs, accounting firms, industry regulators, government and a host of other smart people. They all let us down. A great many of them lied to us, intentionally misleading us in the name of greed and personal profit. Even index fund providers let us down, charging us a fee for the "privilege" of losing 38% of our money.

While the collapse of Long-Term Capital Management in the late 1990s demonstrated that genius does fail, the lesson was seen by all but felt by few. The crash of 2008 was the complete reverse. Few saw it coming, but most felt it arrive. If we've learned anything from the experience, it should be that blind trust is a bad idea and that even experts can't predict the market. (To learn more, read Massive Hedge Fund Failures.)

3. You Can't Live on Averages
Market projections, such as those seen in the hypothetical examples included in many 401(k) enrollment kits, always seem to show an 8% return per year, on average doubling your money every eight years. Those pretty pictures make it easy to forget that markets don't usually move in a straight line. All of those projections are based on the idea that investors should buy and hold, but 2008 showed that that strategy doesn't always work, particularly for investors who are approaching retirement.

Next time the markets start to take a dive, people on the cusp of retirement should pay more attention to the possibility of severe declines damaging their odds of leaving the work force any time soon.

What to do? If you see the train coming, get off of the tracks.

4. You Shouldn't Buy What You Don't Understand
The marketplace if filled with complex and exotic offerings that promise the world to investors. Derivatives, special investment vehicles, adjustable-rate mortgages and other new-fangled investments that may be too complex for the average investor racked up huge fees for financial services firms and huge losses for investors. Don't buy what you don't understand is a trite but true sentiment that may be the biggest lesson from the recession. (To learn more on these exotic instruments, see Are Derivatives Safe For Retail Investors?)

5. You Can't Delegate Your Future
Far too many investors operate on the "set it and forget it" plan. They dutifully make their biweekly contributions to their 401(k) plans and let the years pass, hoping for magic by the time they retire. Anyone on that plan who expected to retire anytime between 2008 and 2018 or so is likely in for a rude awakening. Set it and forget it failed. Even target-date-funds, which are supposed to automatically move assets to a more conservative stance as retirement approaches, didn't all do the job investors expected them to do. Moving, forward, "pay attention" may be a better mantra than set it and forget it.

The Bottom Line
If your investments are doing well and you get a good run, rebalance to remove risk. If the markets have fallen as far as you can stand, take what you have left and get out. You should know your risk tolerance and know how much damage you have the stomach to take. When you hit your limit, there's no shame in crying "uncle." It's your money, so manage it. Even if you delegate the investment management to experts, educate yourself so that you understand what your money is buying, what your hired experts are doing and what course of action you will take if things don't go your way. (For more tips, check out 7 Lessons To Learn From A Market Downturn and 8 Ways To Survive A Market Downturn.)

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