One of the things that happens in large market drops is that investors move from stocks into cash. As individual investor pull money from the equity markets, institutions come to dominate trading.

According to The Wall Street Journal. individual investors are sick of stocks. "Investors pulled a record $72 billion from stock funds overall in October alone, according to the Investment Company Institute, a mutual-fund trade group." It is almost certain that the trend continued last month.

Three things come out of the withdrawals and none of them is good. When individual investors are not in the market to buy it could push demand for stocks down even more, dropping prices more. For those still holding equities, this could drag the value of their portfolios lower even further. This also means a recovery of prices is less likely.

Second, cash moved to money market funds now gets yields which are among the lowest in history. Investors may be moving money to safer havens, but the returns are so low that there is no chance that their portfolios will recover.

The last and most insidious problem is that investors on the sidelines are investors who have no chance to recover when the market moves back up. It always has, and it will again. Timing that is nearly impossible, but for an investor who has lost 50% of his portfolio, being out of equities when they move up means missing a chance to get some capital back.

Off course, the safe play is not to stay in a market which may drop much further. But, the safe play is not always the right one.

Douglas A. McIntyre is an investor at 24/7 Wall St.