As a resident of Seattle, the failure of Washington Mutual last week really strikes home. I know lots of people who work there, and many retirees who held its shares to the bitter end. So well loved and respected is the company that you hear stories like this:

The son of a friend who works there decided to put a sizable portion of his bar mitzvah money in Washington Mutual shares last year. After its value fell by more than half, my friend and her son had a discussion about how the market sometimes misvalues companies and that provides opportunity to long-term investors. After hearing that chat, the young man decided to double down on his mom's company—and his parents helped by shoring up his losses to date.

Well, you know what happened next. It's not pretty. They lost it all last week.

This is the kind of story that turns people off to stock investing for a generation. Maxims about long-term investing are always populated by stocks that have stood the test of time, such as Coca-Cola (KO), Procter & Gamble (PG) and Wal-Mart (WMT). Somehow the examples of companies such as Washington Mutual, Lehman Brothers, Fannie Mae and Bear Stearns don't intrude.

However, I do want to provide a quick counterpoint that you can ruminate upon, or tell your kids. Both occurred to people close to me.

My favorite story about the success of longterm investing—i.e., having the happy fortune to hold good stocks through thick and thin—happened to a friend about 15 years ago. His father had been a factory worker most of his life in Cincinnati and later moved in retirement to the high desert of California and lived modestly in a trailer. When the gentleman died abruptly one day, my friend had to wrap up his seemingly meager financial affairs. He found among his dad's belongings a safe-deposit box key, and after visiting the bank my friend discovered a handful of Intel (INTC) stock certificates dating from the mid-1970s.

My friend was shocked, as he never even knew his dad to have a single share of anything. So he asked his relatives in Cincinnati about the stock and discovered that back in the bear market of 1974 his dad had been watching "Wall Street Week with Louis Rukeyser" when the iconic host told viewers that they should take advantage of the sharp decline in prices to buy stocks. One of his guests recommended a new…