CHICAGO (AP) -- Cheryl and Jim Friedman, retirees in St. Louis, had two-thirds of their retirement money in the stock market in 2008. When the financial crisis struck that fall and stocks lurched up and down with nauseating speed, Cheryl, a former accountant, pulled the money out.
Fearing that the next crisis was always around the corner, they have kept most of the money out. It's parked in a money-market account earning a meager 0.1 percent per year. The Friedmans watched in agony as stock prices doubled over the past three years.
"I have a whole lot of money sitting on the sidelines, because I'm afraid," she says. "The little guy is thinking, 'Well, things are good again now, I'll get back in.' And that's when they pull the rug out from under you."
Three years ago Friday, the Dow Jones industrial average closed at 6,547, its low during the Great Recession. Retirement accounts across the country had been devastated since October 2007, when the Dow hit a record of 14,164.
Last week, the Dow closed above 13,000, although it has fallen back slightly. It has been one of the greatest three-year runs in the history of the stock market, exceeded only by the dot-com stock craze of the late 1990s and the recovery from the Depression.
Some people gritted their teeth through the steep losses and poured more money into stocks while the market was still in free fall. That daring paid off in the returns of a lifetime.
"I felt that either the world's going to end or it's the smartest time ever to invest," recalls Harvey Bookman, 60, of Brooklyn, N.Y., who has made up his initial market losses many times over by buying when stock prices were low.
Bookman bought shares of Avis stock for 41 cents apiece on March 4, 2009, five days before the bottom. He sold them in September 2009 for $11.92 apiece. Total profit, minus commission: $46,026.
For many more, however, even a doubling of the market has not been enough to get them back in. The scars of the 2008 crash, when the Dow lurched up or down by 500 points or more in a day and people asked aloud whether the economy itself would survive, are that deep.
Since the March 2009 low, there have been only two months in which individual investors put more money into stock mutual funds than they took out, according to EPFR Global, which tracks funds.
The fuel for the market's ride higher since 2009 has come from big institutional investors instead.
For small investors, there have been more than enough reasons to sit out. After the 2008 crash, there was the "flash crash" of May 6, 2010, when a large trade overwhelmed computer serves and the Dow plunged to a loss of almost 1,000 points in minutes.
In just the past year, the European financial crisis, a downgrade of the United States credit rating, fear of a default by the U.S. government, high gas prices and supply disruptions from the Japanese tsunami have all whipsawed the stock market.
"It doesn't feel like we've doubled over the last three years," says Jack Ablin, chief investment officer at Harris Private Bank in Chicago. "The S&P's gains were masked by all the turbulence. That's probably why so many individual investors are sitting it out."
Joe Kelly, a financial planner in Bordentown, N.J., said one of his clients, an office manager in her 50s, yanked all $200,000 of her savings out of stocks and into cash one night in January 2009, against his advice.
Temporary peace of mind turned to angst as she missed a historic rally.
"She's crying," Kelly says. "She's lost so much money."
People who had the intestinal fortitude to sit tight during the crash have reaped three years of rewards. 401(k) account holdings have mostly recovered. And contributions at every paycheck during the market bottom bought shares of stock at bargain prices.
It's been harder for retirees who don't have big savings and have less time to recover from severe downturns.
"People in retirement are having a heck of a time dealing with this volatility," says Paul Jarvis, a financial planner in Fargo, N.D., who has spent extra time calming the fears of older clients. "They're trying to psychologically get a grip on how it affects them."
They also have few appealing alternatives to stocks if they want to earn decent income on their savings. The Federal Reserve has kept interest rates low since 2008, first by cutting short-term rates and then by buying Treasury bonds, which have reduced long-term rates.
Those moves left investors a choice of taking more risk with their money in the stock market or settling for near-zero returns on money-market funds and bank savings accounts, and not much better on certificates of deposit.
Those who have the stomach to stay in stocks may have reaped rewards, but they will never forget the ride.
Jay Sachs of New York recalls thinking about putting his savings under a mattress when the Dow plunged 777 points on one day in September 2008. By the following March, with daily declines continuing, he was still "scared out of my mind."
But Sachs, a retired computer consultant, soon tiptoed back into the market, buying dividend-paying blue chips and some mutual funds three years ago. Today his portfolio is well above where it was before the crisis began.
But his optimism is muted because of what he endured in 2008.
"The fact that there's still some fear out there is probably a good thing," he says. "Because when everyone is euphoric, you'd better start trimming your sails."
Bookman of Brooklyn, a retired software executive, is an investing enthusiast who made more than 1,700 trades through his Scottrade account last year. He prides himself on keeping emotion out of his investing.
That strategy was severely tested when he lost 70 percent of his holdings in eight months during the crisis. But he kept going, remembering the advice of Warren Buffett, the billionaire investor: Be fearful when others are greedy and greedy when others are fearful.
"I just kept buying because I had waited for this time my whole life," he says. "I had heard about the Depression when anybody who had bought at the bottom made a fortune."
Even investors who put their faith, and their money, in the market during its darkest days have muted expectations for stocks in the near future. Expecting a pullback in stocks, Bookman has sold 30 percent of his holdings in the last two months.
"I just think that people right now are too complacent," he says. "I hear about all the problems with Europe and the economy, and a lot of people are out of work, so I don't think things are so good. The market is way up, but the world hasn't changed so much."
Financial experts say the experience of surviving 2008 may embolden investors the next time there's a market shock.
"When we have these downdrafts, they're a good reminder of volatility and a good opportunity to load up on stocks when they're cheap," says James Angel, associate professor of finance at Georgetown University's McDonough School of Business.
Small investors like Doug Heuring, 40, of Cape Girardeau, Mo., vow to be ready for the next crisis. Heuring, a medical technologist, snatched up some biotechnology stocks "when the market was on sale."
His portfolio is 30 percent or more above where it stood when the crisis hit. He knows he could have done even better had he been bolder. But at least he didn't flinch when the market tanked.
"You've got to stay the course," he says. "A lot of people panic when their stocks hit lows, but if they're good companies, they will come back."
That is not so easy for Cheryl Friedman, the St. Louis retiree. She sits in her office and watches market chatter on CNBC all day, waiting for the appropriate time to get back into the market. But the timing never seems right. Not when the crisis was fresh, and not now, when stocks are up more than 20 percent since early October.
"It's very difficult to know what to do," says Friedman, 63. "I should have just sat back and waited. But when you're at this point in life and there's no way to replace your assets, you can't afford the risk."