How Rare Was Yesterday's Market Swoon?
Jun 21st 2013 12:30PM
Updated Jun 21st 2013 12:32PM
Yesterday was ugly. At one point the Dow Jones was down nearly 400 points, or about 2.5%. It was the worst day of the year.
How common is a hard fall like yesterday's?
I looked back at almost a century of market data. There have been 21,276 trading sessions since 1928. Yesterday was the 468th worst, or worse than about 98% of all other days.
That might sound bad, but it's really not. On average, we have six days a year as bad or worse than yesterday. About once every two months.
How many headlines did you see yesterday that said, "Dow has a pretty normal fall"? None. In the long draw of history, these big moves are fairly common, but we rarely think that when they happen. A big fall feels important, like the market is sending a message we need to listen to -- even if it isn't.
If yesterday's big drop caught your attention, ask yourself three questions.
1. Did you view it as an opportunity to buy good companies at lower prices? If so, great! You probably benefit from watching daily market moves.
2. Did it make you anxious, or contemplate selling in order to avoid more losses? If so, you'd probably benefit from ignoring all market news. Set a schedule to check your portfolio, say, four times a year. Other than that, realize that tracking the market on a day-to-day basis is likely toying with your emotions and tempting you into decisions that you'll likely regret over time.
3. Did you not care either way? Great. Congratulations. Now go find a new hobby besides reading financial news and let your money compound over time.
More than a hundred years ago, someone asked J.P. Morgan what the market will do. "It will fluctuate," he allegedly said. He's been right ever since.
The article How Rare Was Yesterday's Market Swoon? originally appeared on Fool.com.Fool contributor Morgan Housel has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.