Retirement savers who didn’t blink saw big gains 401(k) participants who stuck with equities saw balances grow. By Andrea Coombes, MarketWatch

Retirement savers who didn’t blink saw big gains 401(k) participants who stuck with equities saw balances grow. By Andrea Coombes, MarketWatch  Aug. 18, 2011, 12:01 a.m. EDT

SAN FRANCISCO (MarketWatch) — Did you stick with your investment plan through the madness that was the stock market in 2008 and early 2009? If you did, new evidence suggests your 401(k) account balance grew by a much larger amount than savers who jumped out of equities, even temporarily.

For 401(k) investors who kept with their equity allocation and continued to contribute to their plan as the financial markets went into free-fall in late 2008, their average account balance grew by 64% in the period from Oct. 1, 2008, through June 30, 2011, according to a Fidelity Investments study published Thursday. FALLACY #1: Measuring from a historical low point to a historical high point. Everything is clear in hindsight, isn’t it?

But the average account balance grew just 2% in that time period for retirement savers who moved their money entirely out of equities between Oct. 1, 2008 and March 31, 2009 — and stayed out of equities through June 2011, according to Fidelity’s study of 7.1 million 401(k) people who participated in the plans it manages from Oct. 1, 2008 through June 30, 2011.

Some savers exited equities during the 2008 downturn, but then jumped back in at some point: Their account balances grew by 25% on average. The percentage change in average account balance includes both the workers’ contributions plus market gains or losses.

The majority of plan participants stuck with their game plan. Just 1.6% of the participants studied shed their equity positions, according to the study.

Another 1.4% of people stayed in equities but stopped contributing to their plan in the Oct. 2008 through March 2009 period. Maybe they were afraid of throwing more money into the market, or perhaps the household suffered a job loss and they needed that money to pay household expenses. Account balances for those plan participants rose 26% on average, through June 30, 2011.

“People either had one response or the other,” said Beth McHugh, vice president of market insights at Fidelity. “Either, ‘I’m getting out [of equities] altogether,’ or, ‘I’m not going to add any more to the market; I’m taking my money elsewhere,’” she said. “A small subset did both — that was about 5,000 participants.”

Andrea Coombes is MarketWatch's personal finance editor, based in San Francisco.