Newspaper article THE JOURNAL RECORD

In Decade since 1987 Crash, an Amazing Financial Boom

Newspaper article THE JOURNAL RECORD

In Decade since 1987 Crash, an Amazing Financial Boom

Article excerpt

NEW YORK -- When the Crash of 1987 hit Wall Street 10 years ago this month, Chicago businessman Bob Goodman says he got a first- hand lesson in the virtues of keeping his investments diversified.

"My money was mostly in mutual funds, but it wasn't concentrated in aggressive or growth stock funds," recalls Goodman, now 52 and the president of Zonne Bookbinders.

"I had some balanced funds and bond funds as well, and they weren't hit too badly. So when the day of judgment came, it really wasn't all that bleak. Obviously, that day was a setback. But I did not panic. I felt very comfortable because I was so spread out." In the decade since, that sort of calm and patience has been more than vindicated. Instead of the disaster many people feared at the time, the severe selloff in the 1987 stock market set the stage for a financial boom that continues to this day. Mutual funds, in particular, have flourished. At the end of 1987, funds of all types held a total of $770 billion, according to the Investment Company Institute in Washington. Today, the fund industry is more than five times that size, with assets of about $4.2 trillion in more than 150 million investor accounts. The stock market has stoked that explosive growth with a historic rise from its 1987 lows. The Dow Jones average of 30 industrial stocks, the oldest and best-known indicator of market trends, fell 984 points, or 36 percent, over a two-month span that culminated in Black Monday on Oct. 19 of that year. From its Black Monday close of 1,738.74, however, it has since soared by more than 350 percent to the neighborhood of 8,000. Along the way, there have been other, smaller selloffs to evoke memories of the crash. But, thanks in no small measure to the way the stocks recovered so strongly from the `87 debacle, many investors have schooled themselves to think of drops in the market as buying opportunities. Torrents of money pour into stock funds month after month and year after year, fed by a powerful faith in the long-term merits of stock investments. A big part of this flow occurs through the medium of employer-sponsored 401(k) retirement plans, which were still a relatively new idea 10 years ago. …

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