When Markets Crashed: The 4 Worst Single-Day Drops in S&P History

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Now first, rank the four worst single-day percentage declines historically in the S&P.
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So the biggest loss is to have a current single day.
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Exactly. So you've got four options. Break it down. You've got March 16th,
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the COVID-19 crash of 2020.
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October 19th, the Black Monday crash of 1987.
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October 28th, the Great Crash of 1929. And then you've got October 29th,
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the Black Tuesday crash of 1929.
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Okay, so for the worst single-day percentage declines, I know number one,
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which is the Black Market Crash of 1987. So I'm gonna go there and mock that in.
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So for the back-to-back crashes of 1929, I can't remember if the first or second day was worse.
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So I'm just gonna go ahead and mock it number two as Black Tuesday. Blah.
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Number four as the Great Crash of 1929.
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And that leaves number three as the COVID-19 crash.
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And we're locked.
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Wait, wait, wait, can I swap to it?
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No, no, no, we're buzzed, we're buzzed, we're buzzed, we're buzzed.
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Okay, okay, okay. Third place, so the third worst recorded day of the S&P 500
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is the COVID-19 crash in 2020. The market went down 11.98%.
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We all know this too well. Maybe lost some friendships, some family fights, some divorces.
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It was quite a time.
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Yeah, yeah, we already retired us.
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Now, October 28th was the great crash of 1929. And the S&P went down over 12%
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in that single day, landing that great crash at number two on our list.
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And get this, the very next day is October 29th, and that is the Black Tuesday crash of 1929.
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The S&P continued to go down another 10.16% that very next day.
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I knew I should switch those two. Which helped lead to the Great Depression,
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and I'm sure some of you remember that that day broke a record trading approximately 16 million shares.
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So essentially, the economy was booming. Everyone wanted a slice of the cake.
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Many purchased stock that borrowed money.
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The market began falling. Investors received marginal calls.
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Now, Abby, you just took that big test. What's a marginal call?
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So a margin call is when the stocks are bought with borrowed money.
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They lose value and the lender demands that that investor either adds more money
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or sells the stock to be able to repay the loan.
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And that essentially caused great depression. And with the plethora of trades
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that you talked about earlier, I think the ticker system that single day actually
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fell like hours behind, which is never good.
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but that leads us to our number one spot or october 19th the black monday crash
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of 1987 the market went down 20.47 in that single
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Day okay before we move on i do want to note that those back-to-back crashes
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in 1929 are very very very rare and i am curious are we able to pull those numbers
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to see what the market did the following day after each of these crashes
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Absolutely amazing point let's lock in those numbers one time so we got first
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spot october 19th the black monday crash of 1987 the market went down 20.47
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percent the very next day it went up 5.33
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at our second spot we got october 28th the great crash of 1929 the market went
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down 12.34 percent the very next day went up 10.16
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and then we have third spot we got march 16th cover 19 crash of 2020 the market
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went down 11.98 percent that very next day up six percent
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and then we have the october 29th the Black Tuesday of 1929.
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Obviously the market went down 10.16 and again went down the next day 12.53
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percentage which to your point is very very very not normal.
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Exactly it's important to be educated and understand that statistically the
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worst days in the market are often followed by the best days.
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Ah you sure let me switch those Rob.
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So which is kind of a huge part of this entire investing game right is like
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how to stay invested, when to pull, how to emotionally invest right because
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it's got It's gotta be so dang hard to
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see the market go down 20%, 10%, whatever it might be on that day,
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and just be like, I'm okay. It's gonna come back up.
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How do you like deal with that with your clients?
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It's a great question. And it's something I deal with every day.
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As a human, it's very normal to want to and to actually follow that emotion.
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So if you're excited or you're upset, you're jumping in the market,
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you're jumping out of the market, and that's not going to get you your best long-term growth.
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It becomes a thing of like fear of missing out, right? Market goes up.
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The Fab 7 is doing great. And I want to get in, right? And the market goes down.
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And you're like, well, I want to get out. Like it's a fear of missing out like anything else.
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Exactly. and then as we were talking about you know a lot of the markets downs
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are followed by the markets ups and so if you miss that right time to get back
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in now you're paying more for it
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Uh so how do you pin that into your client's head because that's such a hard
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thing to like override right for emotions how are you going to override your emotions
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yeah like it's crazy so like how i feel like that's one of the hardest jobs
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as y'all advisors it's like how do
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you you're almost a therapist and your investment and your income stuff.
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So it's, it's a lot of emotions to, to deal with. Like, how do you maintain that?
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Which allows you logically
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walking them through a strategy that's dollar cost averaging it locks in a lower
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cost per share on average by them contributing fixed amounts at regular intervals
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that fixed amount could be
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five hundred dollars one thousand dollars a month it depends upon the person's financial situation
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Okay so essentially you're saying if you can lock in a particular price
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in a particular timeline like once a month right that if you add up all those
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shares that you bought the average if you add them all up and divide it by how
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many shares you have is going to be
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less per share than if I were to just, you know, grab 10 grand here and throw
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it in the market and grab five grand here, throw it in the market.
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Yeah. And because when that price is lower, you're buying more shares with that
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fixed dollar amount. When the price is higher, you're buying less shares with
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that fixed dollar amount.
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Okay. So basically if I have $20 in my hand and I go get gumballs or something
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like, and the gumball is $10, I'm getting two, but if the gumball is 25 cents, i'm getting a
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Plucker right think about target when you walk into target and there's a sales
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action not a sales section there's a shirt for 50 dollars
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you know buy a shirt 50 the sales section has let's just say for hypothetical
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purposes that same shirt for 25 and you get to buy two so now you have two for
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50 and then you have one for 50 so it's
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Funny too because like when you think about when i walk into target i'm like
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oh discount right right when the market goes down you're my my emotions like oh yeah yeah
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Exactly which is very normal and again that's why it's important to be educated
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and a reason why I tried to take the emotion out of it so that they can reframe
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their thinking of in regards to this.
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So yeah, can I give like an example, like more stock market related?
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Yeah, absolutely. So let's let's call a friend day and friend B and they both
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want a certain stock and let's palm palm tree,
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But stock palm tree. So let's call it stock palm tree.
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And so let's say stock palm tree is at $100 right now. Yeah,
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friend day is going to give me $1,200 to invest in stock palm tree at once.
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Okay. Friend B is going to give me $400.
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to invest that
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Month okay and then following next month he's gonna do 400.
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Following the next time every month he's okay friend b is doing 400 every single
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month okay so month one stocks palm trees at 100 he gets 12 shares for that 1200 okay
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100 a share dollars a share 1200 he's 12 shares
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He's done 12 shares he's done now he's locked in oh you can always get out the
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market but he's locked it for this yes um for b invests 400 that month one and
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gets four shares so now we've got 12 v1 four
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Okay so four hundred dollars here twelve hundred dollars there this guy owns
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12 shares of stock palm tree this guy only owns four shares of box
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Stuff yeah four dollars four shares twelve dollars twelve shares okay okay so
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month two stock palm tree goes down to 50. okay so now this guy's
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friend a is probably a little bit nervous then he's wondering should i get out should i not get out his
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Investment just went down to
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600. exactly so now he's yeah so he's
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Questioning himself still has 12 shares but six hundred dollars correct
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Friend b he now gets eight shares
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for that fixed amount at four hundred dollars okay he now gets eight
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Shares just bought another eight shares month too
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For no extra more money than
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He was four hundred dollars because now it's fifty dollars he paid four hundred
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dollars for the same stock at fifty dollars and he got eight shares Yes, right.
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So now he's got the first month was four shares. He bought for 400 second month.
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He has 12 8 8 shares per 400. So now he has 12 shares altogether.
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Yeah, he's 12 shares 12 shares He's only spent friend B's long spent eight hundred
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dollars and friend a has spent twelve hundred dollars and that same shares Okay,
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Not too. Okay. Let's try. Yes. Yes. Yes. Yes.
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Okay. So now we're gonna in the month three Stock was back up to a hundred dollars.
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Okay. This guy friend day still only has 12 shares $1,200 invested.
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So he's basically back apart. Back even, yep. Even, okay. Now friend B, again, $400.
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$400, another four shares. Okay. So now he has 12 plus four, 16 shares.
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16 shares. For $1,200. $1,200, yes.
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This guy's $1,200, 12 shares. Yeah. And if he wants to sell, he has a gain.
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yes because now this talks at a hundred dollars if you have 16 shares at a hundred
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dollars that's sixteen hundred dollars so
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Basically what you said is true the average cost per share when your dollar
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cost average is gonna be lower than just random random direct
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Deposit and so that's the reason why i like to start my clients here and make
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this the foundation of what can you afford to start contributing monthly long-term
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growth and for your retirement but it does help you with taking the emotion
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out market timing and the fear of when to go back in yeah
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Every man gives you that confidence of like not wanting to miss out right i'm
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almost being don't work harder for the smarter
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So having having go like our side of being having that just kind of that that
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fixed amount and you're not worrying about it and you and you know the market's
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human supposed to um that's that's the best way for long-term growth so after
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fully understanding the clients find their situation their goals or risk tolerance and so forth
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i like to start and build the foundation with this process.
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Taking out the emotion, showing them the logic, putting in their numbers and
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reiterating that it's the low sacrifices now that are going to set you up for
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success and long-term growth in the future.
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It's nice that it takes a lot of the thinking out of it too.
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But you're like, Oh, is the markets up? Should I get more? Should I get less?
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Oh, no, I'm good. I got an excellent. I have a plan. I have a strategy.
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I'm not throwing darts at nothing. Now I have a target there, right?
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I actually heard if you put $1,000 a day, excuse me, a day. That would be crazy.
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$1,000 a month into a investment account or whatever, for 30 years that you
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would have like at an 8% return would be like, I think it was like 1.5 million
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or something like that. I mean, yeah, which is crazy. I mean, that's crazy.
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And that's why time in the market early investing is so important because back
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to the little sacrifices and you could probably increase that.
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you're 30 and you're 60, you can start contributing $2,000 a day,
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I'm just kidding a month. And, and you get more compounded growth on that.
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Yeah, it's true. Because I started at $0 in my situation.
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I just put $1,000. So my account was at $1,000. That's before you've done your
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40K rollover, but other compound interest, then it can be a whole nother podcast we can talk about.
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Yeah, yeah. There's a lot of depth. I like that. You said majority of your clients,
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that's how they start and get it going.
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Again, it depends on their financial needs, their goals, But yes,
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ultimately, if it matches their financial situation, I like to start them with
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their monthly contributions. Just get in the market.
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What this whole episode has been about is time in the market.
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Get into the market if you can.
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Beautiful. Well, thank you, Abby. If you're ready to take that next step and
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start your monthly contributions to your future, we'll leave a link in the description
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for you. And remember, folks, the secret to wealth is not what you're in.
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It's what you keep. Happy days, everybody.
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This podcast is for entertainment and educational purposes only and is not intended
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as personal financial advice. Before making any financial decision,
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please do your own research and consult a financial advisor as needed.