Goodbye, October, The Month with Some of the Worst Market Crashes in History

We’re coming to the end of October.

Those of you who are familiar with market history may realise that the month of October happens to be the scene of some of the worst stock market crashes in the US ever recorded.

Below are the anniversary dates – and the percentage declines – for two of the worst single-day crashes for the Dow Jones Industrial Average, one of the oldest stock market indexes in the US. The Dow Jones is also one of the three major indexes – the others being the S&P 500 and the NASDAQ – that track the US stock market.

Source: Google Finance

Now, what’s really interesting is to see how the US stock market has done since its worst ever daily decline (that would be 19 October 1987). Here’s a graph for the Dow Jones from the start of 1987 up till 19 October 2016:

Source: Google Finance

As we can see, the “worst ever market crash” has ended up as merely a small blip on the far left of the chart with the passage of time.

In fact, as my fellow Fool Chong Ser Jing noted in an earlier article of his – even if you had bought the US stock market just before the October 1987 crash and held it all the way through to 19 October 2016, your returns would still have been a healthy 8.8% per year. Ser Jing also shared that the 8.8% annual return “is actually very close to what the US stock market has delivered over the long-term.”

For further perspective, consider that the SPDR STI ETF (SGX: ES3) has returned around 6.7% annually from its inception (11 April 2002) up till the end of this September. The SPDR STI ETF is a proxy for Singapore’s market barometer, the Straits Times Index (SGX: ^STI).

Foolish take away

Foolish investors may do best to always keep their eyes on the long-term.

After all, that could be where the best returns in the share market can be found. Individual investors might also want to take to heart the wise words of Tom Gardner, the chief executive and co-founder of the Motley Fool. Tom once quipped:

“Stocks down for the day, week, month or year … well, what can I learn from that?

When all is said and done, none of us will remember how our money did on any given day. We’ll even have trouble remembering our performance in any given year. But from saving methodically and investing avidly, the odds are very high we’ll have increasing levels of financial independence such that we can live our days freely as we choose.”

The Dow Jones’ long-term chart is a reminder that it is very unlikely we will remember the occasional daily blemishes of the stock market as the years pass and the weight of long-term investing returns grow.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong doesn’t own shares in any companies mentioned.