Who's to Blame for the Market Meltdown?

No one's more upset about last year's corporate meltdown than investors. Yet investors aren't blameless for the moves that ended up costing them money during the bear market.

The folks at ShareOwners.org recently released some interesting survey results, finding that a third of Americans (34%) are "angry" about Wall Street's role in our recent financial meltdown. Some 79% want to see "strong action" to remedy problems.

Interestingly, 87% of those surveyed agreed that "investors who lose their retirement savings due to fraud and abuse should have the right to go to court if necessary to recover those funds." It's hard for me to argue with that, but I hope that the respondents realize that most people who lost lots of money in 2008 didn't do so because of fraud.

For example, check out the 2008 performance from some companies that reside on Fortune magazine's list of most-admired companies, along with their ratings on Motley Fool CAPS:

Sources: Motley Fool CAPS, Morningstar.

It's very often the case that when there's a big disruption in the market, most stocks suffer, at least for a while. It's true that massive misbehavior and lax supervision led many companies to a bad end and that they took many other companies with them -- but for most, it wasn't simple fraud.

You might argue that fraud or other malfeasance at some companies led to the marketwide meltdown of 2008 and was thus responsible for it all. But think a little harder: What really sank otherwise healthy stocks was, to a large extent, the fact that investors lost faith, panicked, and sold their shares. In other words, we are to blame, to some degree, if we sold holdings out of fear.

Did investors really think that Starbucks, Best Buy, and Toyota were going to go out of business? I doubt it. What those companies have in common, though, is simply some cyclicality. When the economy sours, many investors are less eager to buy a large-screen TV, a new car, or an iced single venti, seven-pump peppermint, caramel sauce top and bottom, light-ice, no-whip mocha. Similarly, consumers in a recession will likely cut back on travel and new technology.

Reasons for falls
Some companies, such as Apple and Google, may have seen their stocks pull back because investors concluded that they'd gotten ahead of themselves, in a wave of investor euphoria. Such companies have been market darlings, after all, boasting impressive profit margins and growth rates. For example:

Source: Motley Fool CAPS.

That kind of strength can make investors temporarily lose their senses, and then suffer for it when the stocks reverse direction and head toward their intrinsic values.

Good news
Fortunately, while we shouldn't blame corporate misbehavior for so many stocks' losses in value, we also needn't fret about so many people's retirements being wiped out. Yes, the market fell about 37% in 2008. But as I type this, it has gained 19% so far this year. Check out how the companies above have fared:

Source: Morningstar, as of Oct. 6.

Again, not panicking is the key. If your IRA and 401(k) got squashed in 2008 but you hung in there, you're likely in much improved shape now.

Devastating years like 2008 happen now and then -- fortunately, not too frequently. You can set yourself up to be prepared for them, though, and to build a comfortable retirement for yourself. You just need to know what to expect in investing and to be able to calmly stick to your principles and strategy even in tough times.

Do you feel like you've screwed up your retirement? Find out why Dan Caplinger thinks it's not too late to restore it.