Happy Anniversary

Twenty years ago today, the Dow Jones Industrial average experienced its worst one day loss in history. What became known as “Black Monday,” the Dow lost a whopping 22.6% in one day. Panicked sellers, who couldn’t control their emotions, sold as much as they could on that day locking in their losses.

We always like to use these terrible events as a point of education for clients. For instance, what if you had the unfortunate experience of investing $10,000 in the market on Friday, October 16, 1987? You would have watched your investment drop to $7,739 by the end of the trading day on Black Monday. That alone would be enough for most people to swear off stocks for the rest of their life.

However, if you managed to keep your emotions in check and not sell your stocks you would have broken even by the end of January, 1989. And today, your initial investment would be worth over $61,800 for a total gain of 518%.

But what if you had the fortitude to invest another $10,000 on Black Monday? You would have broken even on your total investment in two days and, although the value fluctuated for some months, you would have permanently been in the black by February, 1988. Your $20,000 investment would be worth $141,698 today, a total gain of 608%.

The simple lesson is the markets will go down from time to time. However, as history has shown, they always come back and continue to new highs. When you experience an inevitable downturn in the market, your best bet is to stay put. Better yet, consider adding more money to your investments!


*Source: Yahoo! Finance. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.