Stock lessons to be learned from owning General Motors

— -- Q: General Motors has filed for bankruptcy protection and its stock is nearly worthless. Does that mean I should just write off the money I have invested in GM or at some time in the future will the stock be worth something again?

A: Every once in awhile investors will witness the equivalent of a building being imploded. From time to time there will be a stock implosion that just makes mouths drop open.

For instance, back in the early 2000, many investors were stunned at the downfall of the once might Enron. But recently there's an even more breathtaking example: General Motors.

After all, many investors told to buy "companies that will be around awhile" and that pay a dividend, probably thought they were playing it safe owning GM. The company has been a symbol of American capitalism for decades.

But all that came to a grinding halt in June after the once mighty GM filed for bankruptcy protection. Suddenly, GM, which once was one of the most valuable companies in America, saw it shares get kicked out of the Dow Jones industrial average and New York Stock Exchange in one fell swoop. The stock now trades by the symbol GMGMQ on the Pink Sheets for about $1 a share.

These types of situations are somewhat tricky. Currently, the shares are trading almost like a stock option. Speculators might buy shares of GM, hoping that there might be some kind of decision by the courts that might give stock investors a penny or more on the $1 of their investment.

Yet others sometimes cling onto these shares hoping that some sort of securities class action lawsuit may yield a small return of their investment.

I don't see much merit in these claims. First of all, common shareholders are last in line for the claims of a company in bankruptcy protection. Bankruptcy proceedings haven't been very good for shareholders in recent history or even longer-term, as you can read here: GM's beaten-down stock might not be a good deal

As for the lawsuit angle, any payout if at all would be tiny. And in most cases, you don't have to own shares currently to be part of a class action suit.

My advice: Sell your GM and move on. Take your capital loss if you owned the stock in a taxable account and learn from the mistake. The No.1 lesson for stock investors who buy individual stocks is to cut losses. Never ride a stock down 10% or more from what you paid. That will keep you out of this situation in the future.

Matt Krantz is a financial markets reporter at USA TODAY and author of Investing Online for Dummies. He answers a different reader question every weekday in his Ask Matt column at money.usatoday.com. To submit a question, e-mail Matt at mkrantz@usatoday.com. Click here to see previous Ask Matt columns. Follow Matt on Twitter at: twitter.com/mattkrantz