When you walk into our office, you are greeted with two framed newspaper covers from the New York Times.  One of which is from Tuesday, October 20th, 1987.  This, of course, is the day after the infamous “Black Monday,” and the headline reads “STOCKS PLUNGE 508 POINTS, A DROP OF 22.6%”.  This remains the largest single-day percentage drop of a major US equity index.

I was a junior in my high school AP history class taught by Mr. Monk at this time.  There was no email, texting, or direct messaging back then, but somehow Mr. Monk found out the prices of the greatest companies in the world (i.e. the stock market) were becoming rapidly cheaper.  Mr. Monk chose to view this as a world-ending event, then panicked and raced out of the classroom to make a phone call to Fidelity.  Phone lines were busy, of course, so I enjoyed almost an entire class without a teacher for the day.  Just before class ended, Mr. Monk came back into our room, almost out of breath and with a sigh of relief.  “The stock market is tanking! Luckily, I was able to get my call in and sell all my investments.”

Warren Buffett was also an investor during that time, running Berkshire Hathaway.  His stock holdings were down by about the same percentage.  At the end of the day, Mr. Buffett’s net worth fell over $347 million! Now, Mr. Buffett is well known for being one of the greatest investors of all time.  One of his core attributes is not selling during a major decline.  Yes, Mr. Buffett’s net worth dropped tremendously, but who lost more money, Mr. Buffett or Mr. Monk?

The unfortunate answer is my history teacher is the only one here who lost money.  Losses are not realized until you sell.  Mr. Buffett never sold. 

I have no idea what Mr. Monk was invested in, but if he just owned the DJIA, it would not have taken long for his portfolio to reach its previous high.  By year-end, this index was up by over 12%.   12 months later, a positive 27.43% return.  Zoom out even further and we realize the power in being the owner of a diversified portfolio of companies.  Here is how that discipline played out over time:

	10/19/1987	3/31/2026
BRK-A	3,170	718,140
DJIA*	1,739	46,342

*Quoted as price only, not adjusted for dividends

The truth is that many investments can go to zero, and maybe Mr. Monk had invested in something speculative.  Also, Mr. Monk is not alone in his reaction.  Even today, many folks feel safe after selling during a decline.  History, however, has shown that overall prices do recover and that feeling of safety quickly turns into regret. 

I certainly hope that Mr. Monk realized his mistake and reinvested as soon as possible.  Our philosophy is to avoid speculation, maintain adequate savings, and adhere to our diversified portfolio of companies.  This enables our clients to access their savings during episodes of market price declines.  Our intention is to defer or avoid selling any part of the equity portfolio at depressed prices.

The goal isn’t to predict market crashes, it’s to prepare for them. A diversified portfolio and adequate liquidity give our clients the ability to live their lives without being forced to sell investments when prices are temporarily depressed.


* Hypothetical Illustration for DJ Industrial Average TR USD (USD)(IDX) 10-19-1987 to 10-19-1988

* Hypothetical Illustration for DJ Industrial Average TR USD (USD)(IDX) 10-19-1987 to 12-31-1987


The solutions discussed may not be appropriate for your personal situation, even if it is similar to the example presented. Investors should make their own decisions based on their specific investment objectives and financial circumstances. It should not be assumed that the recommendations made in this situation achieved any of the goals mentioned. This example is hypothetical and does not represent any specific, investments or strategies.