The ’87 Market Crash — Lessons Learned 25 Years Later
Do you know where you were 25 years ago?
If you had money in the stock market, then you probably don’t need me to remind you that just about 25 years ago, October 19, 1987, is notoriously known as “Black Monday,” and this ominous moniker has been assigned for very good reason. That’s because on that day, the Dow Jones Industrial Average suffered its largest one-day percentage loss ever, with a horrific 22.6% collapse.
Just about every investor lost huge amounts of money that day; however, there was one group of investors that sidestepped the selling almost completely. Here I am proud to say that it was followers of the Fabian trend-following philosophy didn’t suffer any losses at all.
How was this possible?
Well, because a few days prior to Black Monday, we issued a Fabian Plan Sell signal, and we recommended investors get out of the market completely. We knew that the technical levels on the market signaled a pending decline. Though we couldn’t have predicted such a massive one-day slide, we did know that stocks were facing a high probability of danger.
This 1987 crash was a big moment for many investors, because it made them see that their money wasn’t always safe, and that you couldn’t just buy and hold stocks without consequences. Well, today this premise even truer. In fact, now that there have been so many technical innovations in the market due to high-speed computers, I suspect that another big drop — possibly of even larger proportions — could easily take place again.
In this week’s Monday Morning Market Outlook podcast, I go into great detail about the 1987 market crash, including the valuable lessons learned from this experience. I want you to be sure and listen to this podcast, as I think it’s the one don’t-miss discussion of what Black Monday means for us all.
Here are just a few highlights of some of the lessons learned from that fateful day:
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Crashes cannot be avoided, because human nature always involves panic.
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Crashes don’t happen in a single day. There was a lot of selling prior to Black Monday, and those who don’t heed the warning signs usually get punished.
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The degree of exposure to unprotected risk will dictate your pain in the next crash.
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Having a diversified, risk-protected portfolio with exposure to multiple asset classes is your best weapon in the battle to survive the next crash.
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The aftermath of market crashes usually bring about the best buying opportunities.
If you’d like to find out more about the lessons learned from the Black Monday, then listening to this week’s Monday Morning Market Outlook podcast is simply a must.
Jim Woods is a 30-plus-year veteran of the markets with varied experience as a broker, hedge fund trader, financial writer, author and newsletter editor.
His books include co-authoring, “Billion Dollar Green: Profit from the Eco Revolution,” and “The Wealth Shield: How to Invest and Protect Your Money from Another Stock Market Crash, Financial Crisis or Global Economic Collapse.” He’s also ghostwritten many books and articles, as well as edited content for some of the investment industry’s biggest luminaries. Read more about Jim Woods.
