Five years later, 'still traumatized' by market
It's been five years since the late, great Mark Haines stepped "out on a limb" and called the bottom of the market's free fall.
Since that day in March 2009, the market has remade all of its losses and then some. So do you feel all better now?
Me neither.
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Last week, I was at an event where Howard Marks of Oaktree Capital talked candidly about his concerns. He said that while the top echelon of investors may be seeing a recovery, most everyone else "is still traumatized."
I see those invisible scars in parts of the country that missed none of the bear market, and some of the bull, especially in the West, where too many people lost money, houses, and jobs. That last problem—job loss—prevented some investors from participating in the market rebound.
Even I was not immune to the gut-wrenching fear that began in the fall of 2008. As a CNBC employee, I can only invest in mutual funds and exchange-traded funds, not individual stocks, and I decided to cash out a portion of my investments. "Are you sure you want to do that?" asked my financial advisor. "I don't want to lose everything," I replied. A house four doors up from me had just gone into foreclosure, friends at Countrywide were losing their jobs, and soon I would have to come up with money to send our daughter to college. Meanwhile, banks were toppling, stocks were skidding, and the Fed was making things up as it went along.
"The whole thing is that nobody knew where the bottom was," investor Michael Horan said last week outside the New York Stock Exchange. Another investor, Eric Higgins, admitted he lost 50 percent of his portfolio in the collapse. "Markets are going to go up and down, if they didn't go down, they wouldn't come back up."
(Read more: Perfect storm for inflation could rock the market)
In a survey of investors, Fidelity found that 64 percent were either scared or confused as the market tanked five years ago. Nearly half lost a "significant" portion of their assets, and more than a third saw a loss of income. The average loss during that time was 34 percent, and nearly 1 in 5 surveyed—17 percent—saw at least one head of household lose his or her job.
It's hard to recover emotionally from that and come back into the market, even if you still have cash left to invest.
"I'm not in with both feet, I'm in with one," said Lamar Jones, an investor who owns a business in Raleigh, N.C. Jones looks back on 2008 and 2009 and wonders what might have been. "My choice was that the money market was paying 1 percent and the bank was paying 5½ percent, and so I thought I would be smart and buy the 5½ percent dividend bank stock." Within six months, "It got down to 90 cents a share. That took a chunk out of my savings. ... The fear takes over and it got me as much as the next guy."
Five years later, "There are very few people saying they have to be 'all in' on the market," said J.J. Kinahan, chief strategist for TD Ameritrade. "In fact, although our engagement rate has increased, even those that are long seem to have one foot out the door. They are ready to leave the long position quickly if things turn." At the same time, "Those who are short seem to really like their positions."
Kinahan said the crisis has made investors less passive and more engaged in investment decisions. The Fidelity study found that while 65 percent of investors were scared or confused in 2009, 56 percent now feel more prepared and confident. About half have decreased their personal debt, and 42 percent have increased their contributions to their retirement accounts.
(Read more: This is what could end stock bull market: Paulsen)
The investments I cashed in at the bottom have also come back into the market. After all, where else can one put money to earn a return that beats inflation? I'm not talking about the inflation rate the federal government trots out every month. Real inflation, for me, is the inflation in taxes, insurance, health care, college, bacon, beef, milk and veterinary bills. Those are up lot more than 1.6 percent in a year.
Lamar Jones said that these days he owns more funds and fewer individual stocks than he did in 2009. "The stocks I own today, I'm pretty comfortable with the management and what they're doing, and the products."
But it's hard to shake the past.
"I thought I could buy an Aston Martin," he joked about his hopes back before the crash, "and with the money I lost, I probably could've bought an Aston Martin."
—By CNBC's Jane Wells. Follow her on Twitter @janewells.