What to Do When The Stock Market Crashes
, on July 28, 2007
For new investors, a stock market crash can be a frightening experience. In the past few days, there were a lot of gloom and doom talk about the stock market that closed 13,265.47 on Friday, July 27 off the record high of 14,000.41 sets on Thursday, July 19 — a 9.47% drop in 6 days! If you are new to investing, or just invest for the short-term, this is a scary drop. You may begin to think that stock market is like a roller coaster ride — a gamble at best. Here’s what the past 5 days look like:
But one nice thing about roller coaster is that you will be safe as long as you are buckled in and hang on tight. But if you try to jump off in the middle of the ride, that’s when you will hit the bucket. Now, take a look at the stock market from 1950, and see if it’s really that gloomy.
Would you believe that the chart includes at least 12 Bear markets*:
- 1956 to 1957: 19% drop from 521 to 420
- 1960 to 1960: 17% drop from 685 to 566
- 1961 to 1962: 27% drop from 735 to 536
- 1966 to 1966: 25% drop from 995 to 744
- 1968 to 1970: 36% drop from 985 to 631
- 1973 to 1974: 45% drop from 1052 to 578
- 1976 to 1978: 27% drop from 1015 to 742
- 1981 to 1982: 24% drop from 1024 to 777
- 1987 to 1987: 36% drop from 2722 to 1739
- 1990 to 1990: 21% drop from 3000 to 2365
- 1998 to 1998: 16% drop from 9250 to 7800
- 2000 to 2003
* Sources: Bear Market of the Past 100 Years and Closing milestones of the Dow Jones Industrial Average
If history is any indication, investors are wise to hang on tight. I am using some of my reserve money to buy a few funds. Why not? Everything is on sale!
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About the AuthorPinyo
is the owner of Moolanomy Personal Finance
and an entrepreneur with over 20 years of business experience. He has a strong appreciation for business management, investing, and wealth building. He has written for many online publications, including American Express and U.S. News.
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