Best Business Commentary

Schooled by Black Monday

Investors in mutual funds are much better informed than they were on Black Monday, says Chuck Jaffe in MarketWatch. Back in 1987, most “common man” investors “only knew what some salesperson had told them about the funds they owned.” Luckily, when the market lost a third of its value, “investors lost a lot of their naiveté.” Now if we hit “bad times,” investors will “intuitively” understand: if the company that manages your mutual fund goes under, it won’t take your money with it; diversify your asset types, not just funds, but don’t expect to “avoid short-term pain”; and not even a “record bad day” can spoil “a lifetime of sound investing.”

Forget all these Black Monday comparisons, says Gene Marcial in BusinessWeek.com. “The Oct. 19, 2007 sell-off should be seen, plainly, as an investor’s bargain-basement opportunity.” Aside from $90-a-barrel oil, nothing that happened Friday should “have shocked anybody.” Investors sold on “a panicky, silly notion” that the 1987 crash was repeating itself. Now, the smart “bargain hunter” will snap up banks hit by the subprime and credit crises. It’s a near certainty “that things will get better before they get worse,” and those stocks will soar at the first excuse. And if they fall more, “consider yourself lucky” and buy more shares.

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