This month marks the anniversary for two major financial jolts in history that exchange traded fund (ETF) investors should know. October 17, 1907 was when the collapse of the Knickerbocker Trust company triggered panic everywhere. Stocks dropped from their 50% highs, banks went out of business, money disappeared and bankruptcy loomed. Eighty years later on October 19, 1987, the Dow Jones dropped 22.6%, causing a downward spiral in the world markets, and nothing could be traced to pinpoint why. Ron DeLegge for ETFGuide reminds of us of our past in an attempt not to repeat it. His major points include:

  • Panicking is a losing strategy.
    Sellers that left the stock market in 1987 and never returned lost about 700% of gains from the Dow Industrial stocks over the next twenty years.
  • Diversifying can help limit financial damage.
    While it can’t protect from complete damage, it can pad portfolios against risk and volatility. Broader asset classes, such as stocks, bonds, commodities, real estate and cash, generally hold up the best during a financial crisis.
  • During the next market crash, be a buyer not a seller.
    This comes from the old saying "buy low, sell high." Historically, market crashes can turn into great buying opportunities.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.