A Little Perspective

Posted: Sep 30, 2008 10:50 AM

When days like yesterday happen, I always go back to the advice I got years ago as a teenager -- save and invest for the long term, avoid the emotion of the short-term, don't buy what I can't afford, avoid debt and adjust my investment risk taking downward as I get closer to my desired retirement date. Pretty much basic Dave Ramsey advice.

A 770 point drop in the DOW is certainly nothing to ignore but it's important to remember that on a percentage basis, it is was only 7% (Oct 1987 was over three times that and you can hardly detect the crash on a 75 year chart).  The DOW is where it was three years ago -- it's lost some value against inflation -- BUT it hasn't seen some sort of catastrophic drop either.  Yes, a trillion dollars of market value was lost yesterday, but it's a trillion dollars of market value that didn't exist three years ago before the market jumped 4,000 points during the housing crisis.

And the market has gained back over 37% of the trillion dollars by 10:30am...