What Mr. Market Taught Me on Black Monday
Thirty-five years ago, today…
It was one of the most dramatic days in the financial markets … of all time.
The Dow Jones plunged 508 points, or 22.6% on Black Monday on October 19, 1987…
It was the largest one-day percentage drop in history.
It wiped out 14 months of gains in only a few hours.
Black Monday destroyed $500 billion of stock values and $1 trillion worldwide.
If a crash of that magnitude happened today it would be the equivalent of wiping out close to $20 trillion — that’s almost the total gross domestic product of the U.S.!
And I had a front-row seat to the whole meltdown.
It really seemed like the end of the stock market and capitalism.
I kid you not…
My point is to share with you — not why the crash happened, but what happened after.
Because what investors did that day, and the months after, meant all the difference in their net worth over the next five to 10 years.
The S&P 500 is up 34X from the October 19, 1987 bottom.
Learning From 5 Bears
At first, no one wanted to talk about stocks or have anything to do with the stock market.
One and a half years later, the Dow Jones had made a new high.
But most investors were still too scared to buy stocks again.
It’s really no surprise because the cycle is always the same:
Fear overtakes greed. People sell near the bottom.
Then greed overtakes fear … right before the next downturn.
Rinse and repeat.
And I’ve seen it firsthand — investing through the last five bear markets.
It has taught me that there is only one strategy to take when stocks are plunging.
It’s something you don’t hear much about, yet it’s pretty simple…
No. 1: Own high-quality businesses bought at bargain prices.
No. 2: If you are fully invested … do nothing. If not fully invested, there is no better time to buy.
No. 3: Ignore the news headlines and don’t waste your time trying to time the stock market bottom.
Only God and liars can invest at the exact bottom.
In fact, legendary investor Peter Lynch said:
“Far more money has been lost by investors in preparing for corrections, or anticipating corrections, than has been lost in the corrections themselves.”
I have no idea how long this bear market will last or when it will end.
But if you can live through it, then you deserve the big returns stocks can generate.
Founder, Real Talk