Apple Inc. (AAPL), JPMorgan Chase & Co. (JPM): Investing Lessons From the Financial Crisis

The Lehman bust caught me flat-footed. All of a sudden, I had a veritable smorgasbord of tempting values in front of me, most of them unlikely to go belly up. But I was also fully invested. I’d hate to sell plunging shares in order to pick up another deep value opportunity, because the stock I’m selling should also rebound strongly from temporary panic-sale levels.

So I’ve made it a habit to keep about 10% of my retirement account in super-liquid money market assets. You know, the interest-bearing portion of your 401(k) or IRA that you think of as “cash.” That way, I’m always ready to pounce on the next shocking discount, whether it’s a company-specific knee-jerk reaction or a marketwide panic like the 2008 debacle.

The fundamentally strong tickers out there can recover from almost any disaster, real or imagined. It pays to be ready when it happens.

John Reeves: The most valuable lesson I learned reinforced something I had read by Seth Klarman. Writing at the time, Klarman pointed out that “not all declines are equal” and that “buying early on the way down looks a great deal like being wrong, but it isn’t.”

During the worst of the crisis in 2008, everything went down regardless of the quality of the underlying business. We now know, in retrospect, that this was a tremendous time to buy excellent companies. But it sure didn’t feel that way at the time.

Here are a couple of examples: from the beginning of 2008 until November 2008, Starbucks Corporation (NASDAQ:SBUX) was down 35% and Apple Inc. (NASDAQ:AAPL) was down 45%. If investors had somehow been able to ignore the scary market collapse, however, they’d be sitting on huge gains since the beginning of 2008 until now with Starbucks up 284% and Apple Inc. (NASDAQ:AAPL) up 154% during that time frame.

The lesson here isn’t, “darn, if only I had bought those stocks…” Rather, the real takeaway is that during 2008 two great businesses were unfairly punished by a gigantic macro event, and that mispricing resulted in a huge opportunity for level-headed investors.

The article 5 Years After Lehman: Investing Lessons From the Financial Crisis originally appeared on Fool.com and is written by Motley Fool Staff.

The Motley Fool recommends American International Group, Apple, Chipotle Mexican Grill, Google, and Starbucks. The Motley Fool owns shares of American International Group, Apple, Chipotle Mexican Grill, General Electric Company, Google, JPMorgan Chase & Co., and Starbucks and has the following options: long January 2014 $25 calls on American International Group.

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