History does not repeat itself, but it often rhymes, as Mark Twain noted. A few months ago we produced this video, in partnership with PlanAdvisor, commemorating the 30th anniversary of the 1987 stock market crash—and the historical lesson it can offer investors.
In purely monetary terms, the gist of the story was this: If you had invested $100,000 in the companies that made up the Dow Jones Industrial Average the Friday before it plunged a record 22% on October 19, 1987—and did nothing—you would have still ended up with $2,174,872 by October of 2017.1
We believe that the lesson of sticking to a long-term investment plan—regardless of short-term market volatility—continues to apply today. The most recent bout of turbulence brings a few key points to mind:
- Market downturns may not equate to a loss unless you sell.
- We believe that time in the markets—rather than an attempt to time the markets is a more effective investment strategy over the long haul.
401(k) investors are typically invested for the long run. If you’re an advisor, remind your plan participants about the virtues of courage and persistence—and of “buckling in” during turbulent times—that have rewarded many investors throughout history. Be sensitive to participants whose allocations seem to have shifted out of line with their risk preferences—or with what they believe it should be at their particular stage of life. And talk to them about diversification across asset classes, which can go a long way toward cushioning portfolios from the effects of episodic volatility.
- ^Based on the Dow Jones Industrial Average, as of October 19, 2018. Index performance is shown for illustrative purposes only and does not predict or depict performance of any Fund. It should not be assumed that an investment in any actual security was profitable or will be profitable in the future. Illustration does not constitute a recommendation as to the suitability of any retirement savings plan for any person or persons having circumstances similar to those portrayed and does not constitute a recommendation on behalf of OppenheimerFunds, Inc. Investing involves risk including possible loss of principal amount invested. Past performance does not guarantee future results.
OppenheimerFunds is not undertaking to provide impartial investment advice or to provide advice in a fiduciary capacity.
These views represent the opinions of OppenheimerFunds’ Head of Retirement and Third Party Distribution