Frozen. That’s the only way I can describe it. Mike, the other financial planner in our office, and I were listening to the report of the stock market rapidly dropping, while staring at each other in disbelief. It was October 19, 1987. We didn’t have a computer screen to look at, so the only continual market updates were coming across the news wire. I remember it vividly – I had only been a financial planner for two years, and my four years of college and two years of business graduate school did not seem adequate preparation for a one-day market plunge of more than 20%. There was not much I could do for my clients at that moment, as 1987 was practically a technological stone-age. There was no online trading – you weren’t allowed to phone in and exchange funds to cash, nor fax in your trades. (Fax? What is that, you ask?) Much has changed. Back then, you could only mail in your investment exchanges or purchases. And I don’t mean e-mail…I’m talking the snail-mail variety.
Fast forward 30 years and we see a stark contrast to the present: Earlier this month CNBC was broadcasting how the Dow Jones Industrial Average crossed over the 23,000 mark; we can now make trades with a few clicks of the mouse; and there exists fiber optic cables that can transmit data about 10 million times faster than your home broadband connection on a good day. Still, today no one has a crystal ball to predict the future of the stock market. We know there will always be bulls and bears– but we are better prepared to utilize the power of modern technology to adjust asset allocations quickly and almost entirely online.
History is always our best learning tool, though, and 1987 teaches us just how important it is to have a broadly diversified portfolio to minimize the effects of experiencing another market crash like that “-20% event.” We hope something like that never happens again, but if it does – whether a drop happens over the span of one day or one week – it is important that you have your funds positioned properly to weather any storm that may come your way.
Robert W. Tull, Jr. is founder and president of Tull Financial Group, and a CERTIFIED FINANCIAL PLANNER™ professional in Chesapeake, Virginia. With more than 30 years of financial planning experience in Hampton Roads and beyond, he focuses on the areas of investment management, and retirement and estate planning. He also provides highly individualized personal and business advisory services.
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