The current bear market, now the worst three years in market history since 1931, has taught investors some harsh lessons. Smart investors learn from other people’s mistakes as well as their own.

But unfortunately, investors can take away the wrong message. And they can make new mistakes while trying to avoid repeating ones from which they are learning.

A case in point came to our attention recently when we were talking to two potential clients, a couple in their 30s, excellent savers, who had built up $100,000 for retirement. Now they wanted professional management.

We talked about their goals and risk tolerance. The husband had no interest in trying to make a killing in the stock market. He wanted a balanced portfolio that would produce a moderate return with moderate risk exposure. We thought that was a great approach for them.

But the wife was unwilling to take any risk at all. She wanted all their money in conservative fixed-income investments. It didn’t take us long to find out why.

Her father, now 65, retired two years ago after working for 37 years for a major national manufacturing company. Over the years, he built up an $800,000 retirement fund, all of it invested in stock of that company. Even after he retired, that stock made up his whole portfolio.

By the time we met his daughter and her husband, her father’s stock was worth only $300,000, dashing his plans for the comfortable retirement for which he had worked so long and hard.

The father’s mistake – investing his retirement fund in a single stock – was serious. But it was understandable. He had worked at this company for almost his entire adult life. He believed in it entirely. He thought he understood the stock, too. In 1999, it was worth 10 times what it had been worth just 20 years earlier.

His mistake was thinking that stock price history, coupled with his loyalty to the company, was all he needed to know and understand. He didn’t realize how important it was to know and apply some basic principles of investing, especially the need to diversify.

Now his daughter was in danger of making an even more costly mistake of her own.

She lobbied for putting the whole $100,000 into guaranteed investment contracts, a fixed-income option backed by an insurance company. These contracts would pay about 5 percent. Over the next 25 years, that would allow the $100,000 to grow to about $339,000.

We believe this couple should invest at least 30 percent of their money in equities, a strategy that over the past 33 years has returned an annualized return of 10 percent, with a worst-12-months loss of less than 7 percent.

If they earned 10 percent over the next 25 years, that $100,000 would grow to nearly $1.1 million. Presumably this couple will continue to add to their savings. If they added only $10,000 a year, they would have $815,906 if they earned 5 percent in fixed-income contracts. At 10 percent, they’d wind up with $2,066,941.

Bottom line: The father lost $500,000 in the bear market. The daughter is in danger of making a mistake that could cost her and her husband more than $1 million.

We don’t know how this will be resolved. But we do know it’s a reminder that going to extremes – either being much too aggressive or much too conservative – can have high long-term costs.