J.P. Morgan was purported to have said the following: "Bear markets return stocks to their rightful owners."

My initial reaction and probably yours is that this is an elitist and offensive remark made by the fattest of fat cats in a very politically incorrect era. But when I began to think about this statement and got beyond my middle-class sensibilities, some inherent hard truths became apparent.

Suppose you are really wealthy and you have your assets spread among different assets, as suggested by Baron Rothschild. I think his suggestion was one-third securities, one-third real estate and one-third collectibles, precious metals and that sort of portable wealth. You have enough wealth that you could maintain your lifestyle if only one of your three asset categories remained with you. (Think wars, revolutions, etc.)

Now suppose the value of your securities is tanking, like today, and you haven't come to the conclusion that things are so bad that your country and its entire economic system are doomed to complete destruction. Being a sophisticated investor, you understand that every security has a quantifiable inherent value based on a combination of underlying assets and earnings and cash-generation capability. You also have accepted the fact that securities markets will value your securities from extremes of undervaluation to overvaluation, with occasional brief stops near the true inherent value.

So you find your securities portfolio reduced to half the value it had a year ago. This represents a reduction of about one-sixth of your total wealth. While you certainly don't like this turn of events, you aren't panicked about it, either. Since you understand that your securities have an inherent value considerably higher than the markets are currently placing on them, you decide to hold and wait until the market swings back to a normal or overvaluation state. In the worst case, you have lost one-third of your wealth and still have more than enough left to maintain your lifestyle. Consequently, the sharp drop in the securities markets doesn't create nearly the amount of anxiety for you that a middle-class investor experiences. You can therefore make the decision, almost always correct, to hold on and wait for the markets to return to normal valuation levels.

This is where I see the hard truth of Morgan's quote. The wealthy person previously described has a lot easier time making the correct decision not to panic and sell securities in a time of extreme undervaluation. For the person who has most of his net worth tied up in securities, the prospect of those securities going to zero is a lot more frightening. He has nothing else to fall back on. If he decides to hold on to his securities and he turns out to be wrong, he is broke. He feels tremendous pressure to sell the securities portfolio for whatever he can get in order to salvage what remains of his net worth.

What lessons can be learned from Morgan's quote? It's probably not a good idea to have all your investment assets in stocks. And, avoid selling into a panic-stricken market.

Author's disclosure: My situation is a lot closer to the middle-class investor than to the extremely wealthy investor. And yes, I'm sweating this out like most everyone else.

Charles Schneider, Minnetonka, is a certified public accountant.