The Oxford Clubs Gives Lessons to Learn From Black Monday

This week will mark the 30 year anniversary of the stock market crash of 1987.

While most anniversaries are celebratory in nature, for most people affected by this event the memories are anything but fond.

That day has been dubbed Black Monday. It occurred October 19, 1987. The Dow plunged 508 points which was a 22.6% drop in value.

As duly noted by Mark Skousen, Black Monday was the worst day the market had ever experienced and this still rings true today.

For most involved in the business of stocks at the time the memories are quite clear.

The market had reached its apex two months early and had been showing volatility since then with many high-low swings from day to day. Despite these warnings no one could imagine what was to come Monday morning.

The market averaged gapped down from the start. Many stocks were forced to delay their opening as specialist working the floor struggled to meet the demand of sell orders.

Black Monday saw investors treat even blue chip stocks as throw aways. The lights on the phone lines constantly blinked with panicked clients. Brokers and analyst were first nervous, then became horrified. Later some could be seen breaking into manic laughter.

The most unsettling thing about Black Monday was that its cause could not be traced back to a single action or event. There was only a sudden dumping of stock compounded by computer driven trading.

These programs were said to provide a buffer against these types of losses by using futures and options. Instead the programs compounded the problem when the mass selling of stock continued thus creating a vicious cycle.

 

Lesson Learned according to The Oxford Club

In times like today, while the market is high, choose quality and diversify broadly. It is also beneficial to properly allocate assets and be sure to use trailing stops. Also, the holding of cash will lessen your risk and keep you prepared for the next bull market.

The Oxford club is an independent network of investors and entrepreneurs seeking to aid members in the gaining and protecting of wealth. The Oxford club has been in operation for more than two decades.

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