In October 1987, the Dow Jones dropped more than 500 points or roughly 22% of its value in one day. Now known as Black Monday, it was the biggest one day drop in the history of the stock market. You can see a list of the worst one day drops here. From his book One Up on Wall Street, Lynch describes what he learned from that day.
“I’ve always believed that investors should ignore the ups and downs of the market. When you sell in desperation, you always sell cheap.
Even if October 19 made you nervous about the stock market, you didn’t have to sell that day – or even the next. You could gradually have reduced your portfolio of stocks and come out ahead of the panic-sellers, because, starting in December, the market rose steadily. By June of 1988 the market recovered some 400 points of the decline, or more than 23%.”
He also says, “Whether its a 508-point day or a 108-point day, in the end superior companies will succeed and mediocre companies will fail, and investors in each will be rewarded accordingly.”
From One Up on Wall Street.
I hope this helps give some perspective to what’s been a rough start to 2016.
The Peter Lynch Investor.