Exactly 19 year ago...

[mickeyd]

at the close of business the Dow sat at 1738.74 and had just had is't biggest hit (-508.00) and was down 22.61% for the day.

10/19/2006 the Dow sits at 12012.

It's been a hell of a ride folks. I have been on the entire ride and I'm sure that this 12k Dow excitement will be a distant memory in 19 years.

 

[Cut-Throat]

I remember some of my co-workers that day, feeling very smug that they never invested in stocks. That day cemented their beliefs, as they vowed to never touch stocks with a ten foot pole.

Oddly enough, I had believed that I was smart enough to time the markets and had moved all my stock mutual funds to money market funds about 45 days earlier. I too was feeling smug as I loaded up on stocks the very next day. It took me about 10 years to realize that I was damn lucky and would probably never be that lucky again.

 

[yakers]

It took me about 10 years to realize that I was damn lucky and would probably never be that lucky again.

Sounds like a smart man to me.

 

[dmpi]

I remember that day well. I lost 25% in one day!
...Good thing I was young and didn't have much money.

I can laugh at it now, but at the time It sure did hurt. You couldn't get to your broker even if you did want to sell. It was a total melt-down.

 

[Leonidas]

Thanks Mickeyd - a good post on perspective and timelines.

In 1982 I had put some money in the market and seldom thought about it. But by '86 (the market had gone from below 1,000 to well over 2,000 and "not a lot of money" had turned into "holy crap, look at my balance". Gee, what a golden age I was living in - the market just kept making me money. And I wondered why other people weren't as smart as me.

On Black Monday in 1987 I heard the news of a "stock market crash" over the radio as I was driving home from work. At home I found CNBC or FNN on TV and tuned in to watch what seemed like the disaster of a lifetime. After the markets closed they rolled the tape and I got to watch it all over again. (maybe I was hoping it would turn out differently the second time around!) The notion that I was an idiot dawned on me right after I realized that markets do go down just as easily as they go up - it just hurts so much when they go down.

Being close to dramatic events always skews one's perception. Back then Black Monday looked like this:

But within a few years the drastic dip had been made up for by a resurgence in the market that started within just a few months. In fact, within three years we were looking at another dip in the market.

Now, here we are 19 years later and look at that little pimple on a gnat's ass:

It's amazing what lengthening the timeline does.

Unlike some investors on that day 19 years ago, I held on to my positions. Mostly because of advice I received from a smart woman (Thanks Jollie) who listened to her older and more experienced clients. It consisted of something like "Don't bail - the smart money is staying in or buying more - this was the market going crazy while the economy is just fine." And she put the amount at risk in perspective for me when she referred to all her other clients as people who had "real money" in the market (I thought I had a fortune - she made it sound like lunch money). She reminded me how young I was and how that should affect my investment timeline.

 

[Lazarus]

I began investing in the Stock Market right after the "Crash of 87", didn't sell a share after the dot-com drop.

 

[Nords]

Oddly enough, I had believed that I was smart enough to time the markets and had moved all my stock mutual funds to money market funds about 45 days earlier. I too was feeling smug as I loaded up on stocks the very next day.

I'm curious, Cut-Throat-- was that the only time you stepped smartly to the side? How many more times did you do that before/after Oct 87? What were the results?



Good post, Leo. It must have taken a half-hour just to get the formatting right...

Unlike some investors on that day 19 years ago, I held on to my positions.

We held on and started shoveling more money in with both hands!

 

[Cut-Throat]

I'm curious, Cut-Throat-- was that the only time you stepped smartly to the side? How many more times did you do that before/after Oct 87? What were the results?

Actually, I started investing about 1982. The only time I was completely out of stocks was for about a month and half prior to the crash of 1987. But, I made enough stupid trades of individual stocks throughout the 90's, that I fessed up to the fact that I really had no investing skill and the bull market of the 90's was smoothing over all of my mistakes.

By the time 1999 rolled around, I realized I probably could have made a lot more money by just investing in the S&P 500 index instead of trying to 'manage' my portfoilo of stocks.

I sold in Sept. 1987, because we had a large run-up in Stocks, I was getting married to a great woman on Oct. 3rd, 1987 and figured that my luck would run-out somewhere! - I just got lucky - In both cases! 8)

 

[Eagle43]

There was a guy at Mega-Corp who talked me into stocks (bless you Stan) sometime around 1988. Since then I have never gotten out. The Dot Com bust had me contemplating moving, but just didn't do it. I never try to time the market, just allocate so I can sleep and let it ride. So far, so good. Now, excuse me while I peek at my Vanguard funds and . . . smile. Life is good.

 

[Ginger]

My DH in his after college years made the stock market his major investment strategy. Never waivered in his belief that it was the way to go if he wanted to reach the road to an early retirement. He is out hiking today... and enjoying every day of freedom from the work environment. I wanted to get out after the 2000 drop, but we held steady.

 

[samclem]

DW and I had been married just few years and had a very small nest-egg in a few mutual funds recommended by a subscription newsletter. "Look at the history of their portfolio--I'll just follow their sell-buy advice and we'll do great!!" Well, when I got home from work, I called their 800 number to find out what to do. When I finally got through, I learned that "as we told our subscribers yesterday, you should reduce your holdings in fund XX and XX by 50%". I then understood instantly how they had run up such a great record.

In retrospect, it was a fairly cheap lesson about the elusive siren song of market timing. We didn't bail out, kept the monthly investments going in, and everything turned out fine.

How would I feel if things dropped that % today? I'd still feel sick.