My friend swears he's learned his lesson.

Back in July of 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 he felt about stocks the way Elizabeth Taylor felt about husbands. 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 has returned more than 220% from when he sold.

Get ready for a 25% drop
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. The vast majority of stocks are down significantly this year, but this is not the time for panic selling.

This table should really drive home the point for you. These are true all-stars from the past decade, yet investors who bailed out on them missed out on some solid gains -- especially considering the S&P 500 lost 37% during this period.

Company

10-Year Gain

Largest Drop

Biogen Idec (Nasdaq: BIIB)

224%

66%

Freeport-McMoRan (NYSE: FCX)

219%

67%

PPL (NYSE: PPL)

188%

51%

PACCAR (Nasdaq: PCAR)

241%

52% Continued...