Few investors realized just how bad this bear market would get. Even experts said things that, in hindsight, proved to be completely wrong.

If you happen to have old issues of Outstanding Investor Digest lying around – and who doesn't? – you'll find an interview with respected investor David Dreman from a year ago. Asked about bank stocks he liked, he named Wells Fargo (NYSE:WFC), Bank of America (NYSE:BAC), and Wachovia. He said he thought Citigroup (NYSE:C) had made some mistakes but was "probably a good value at this point." (I give him credit, unlike some other pundits, for qualifying that with a "probably.")

Well, as you know, Wachovia was bought by Wells Fargo. And in the one year following Dreman's comments in April 2008, Wells Fargo has fallen 48%, Bank of America has dropped 80%, and Citigroup is down 92%. Clearly, he was wrong -- at least in the relatively short run. (For all we know, these banks might end up performing well over the coming many years. But it will still be hard for them to reach their loftier prices of early 2008.)

My point is not to say that Dreman is a bad investor, but instead to point out that good investors make mistakes. Even Warren Buffett has lamented more than a few, such as not buying Wal-Mart (NYSE:WMT) when he should have. (It has averaged over 14% annual growth over the past 20 years, enough to turn $10,000 into nearly $147,000.) 

More recently, the Oracle of Omaha has lamented buying into ConocoPhillips (NYSE:COP) at what turned out to be a bad time. Similarly, fellow legendary investor Peter Lynch copped to missing out on strong money management companies such as Eaton Vance (NYSE:EV) and T. Rowe Price (NASDAQ:TROW) for much of the 1980s.

What to do
From these blunders, we can learn several things. First, mistakes take a variety of forms. For example, there are those of commission and those of omission. You can mess up by buying something you shouldn't, or by not buying something you should have. And you will. Mistakes are inevitable, though we should still try to avoid them.

It has been demonstrated that many investors suffer from overconfidence. Let others' mistakes remind you that you may not be quite the investing genius that you think you are. (This goes for me, too.) Remember that it pays to dig deep into companies before buying.

The good news is that you can actually profit from your mistakes. Learn more: