Warren Buffett Says Doing Nothing Beats Doing Something. History Says He's Right.

Imagine it's Jan. 1, 2008, and you've just put your savings into the SPDR S&P 500 ETF Trust (NYSEMKT: SPY). The financial crisis hasn't fully turned into a disaster, but the signs are building. Subprime mortgage funds are imploding, and Bear Stearns will fail altogether in about two months. The benchmark S&P 500 (SNPINDEX: ^GSPC) is about 9% below its high, but investors aren't in panic mode yet.

By the end of the year, your investment has lost nearly 40% of its value. The bottom won't come until March 2009, with the S&P 500 down more than 50%.

What would you have done in that situation? Would you have sold along the way? Would you have ridden it out to the bottom and back?

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