My friend swears he's learned his lesson.

Back in July 1995, this friend -- let's call him Charlie -- bought Microsoft at what turned out to be the highest price it would reach that year. The stock was down 15% in no time, and Charlie was worried. He was smart enough to know the market is the best wealth-creating machine available to us regular folks, but stocks to him were sort of like husbands to Elizabeth Taylor. He liked them well enough, but he tended to give up when things got a little rocky.

In a matter of weeks, his paper loss was approaching 25%, and he couldn't stand it anymore. He bailed out.

Needless to say, the next few years were even rougher on Charlie as he watched Mr. Softy march steadily higher. It achieved 10-bagger status at the height of the bull market in 2000, but even today it's more than 200% higher than when he sold.

The downs and the ups
As Tom and David Gardner tell their Motley Fool Stock Advisor members, you have to expect significant dips from some of your stocks, and you must remain firm if you've done your homework. Otherwise, you sort of screw up that legendary investing formula by buying high and selling low.

We've been through some rough times recently. At one point in 2008, the S&P 500 had fallen 50%. However, we believe that quality stocks at historically low multiples are the seeds of the next bull market. We're always willing to sell companies that no longer measure up, but we think it would be a big mistake to sell those whose investing thesis hasn't changed.

An interesting lesson can be gleaned from the last bear market. Here are some true all-star performers from the past decade, yet investors who bailed out on them missed out on some big gains.

Company

10-Year Gain

Largest Drop*

UnitedHealth (NYSE: UNH)

230%

42%

Toll Brothers (NYSE: TOL)

206%

60%

Steel Dynamics (Nasdaq: STLD)

284%

51%

Vimpel-Communications (NYSE: VIP) Continued...