On “Black Monday,” Oct 19, 1987, the Dow Jones Industrial Index crashed and lost 22.6% in ONE DAY!

Stocks had been soaring in early 1987. Concerns about federal debt levels, rising interest rates, a trade deficit, and tax law changes may have sparked the sell-off. Large and panicked mutual fund redemption requests, as well as “portfolio insurance”—an early computer-based trading algorithm that was intended to offer investors downside protection, but instead fed the 1987 fire by sending “sell” signals—are often cited as exacerbating the crash.

In Capital Ideas, Peter Bernstein summed up the events leading up to the Black Monday: “The stock market had peaked in mid-August 1987, drifted downward during the rest of the month, wobbled through September, and then started to weaken perceptibly as October progressed. The whole five-year bull market appeared to crumble in the course of the trading week that ended on Friday, October 16. Panic set in even before trading began on Monday morning, October 19. When, at long last, the gong sounded at 4:00 PM to end the day’s trading, the market had plunged 508 points, or 23 percent, a record decline for a single day (Bernstein, Capital Ideas, 285-6).

At home, my father, who helped spark my interest in investing and instilled in me valuable financial lessons, religiously watched “Louis Rukeyser’s Wall Street Week” on PBS. From 1970-2005, Louis Rukeyser (“Uncle Lou”), delivered a humorous monologue and insightful financial commentary, while discussing the country’s financial happenings with prominent investment figures.

On October 23, the Friday evening following the 1987 crash, Louis ran a special program that featured “three genuine titans of investing”: Steven Einhorn, co-chairman of Goldman Sachs Investment Policy Committee; William Schreyer, Chairman and CEO of Merrill Lynch & Co.; and John Templeton, head of The Templeton Funds. This special episode offered viewers a Black Monday postmortem and advice on how to handle their financial portfolios moving forward.

I recently found that fascinating and entertaining “After the Crash” episode on YouTube. Today, we know the outcome: as with other crashes, the market recovered and marched onward and upward. What were these three investment titans thinking at the time? What was their advice to investors? How did that advice hold up throughout time? Is the advice relevant today?

Einhorn offered an intelligent analysis of the economic causes of the market situation. Schreyer prudently suggested to not panic and consider restructuring portfolios. (Check out Part 2 of the episode for their commentary.)

For me, it really gets interesting when Rukeyser, referencing the Wall Street Crash of 1929 that sparked the Great Depression, asks Templeton, “You were around in 1929; what’s the comparison?”

It’s worth listening to John Templeton’s perspective. Money magazine said John Templeton was “arguably the greatest stock picker of the century.” He famously got his start buying stocks trading for less than $1 during the Great Depression, which helped launch his career as a phenomenally successful professional investor. In addition to the Great Depression, Templeton invested through the many bear markets and recessions preceding 1987, became a billionaire, and received Knighthood for his philanthropy. The bulk of Templeton’s worthwhile commentary begins in Part 3 of this Rukeyser episode.

Templeton’s message to viewers in 1987 and throughout his career was consistent:

“It is only common sense to prepare for a bear market. Experts do not know when each bear market will begin, but you can be certain that there will be many bear markets during your lifetime. Common sense investing means that you should prepare yourself both financially and psychologically. Preparing psychologically means to expect that there will be many bull markets and bear markets so that you will not sell at the wrong time or buy at the wrong time. To buy low and sell high is difficult for persons who are not psychologically prepared or who act on emotions rather than facts” (Gibson, Asset Allocation, foreword).

Templeton’s advice to investors is expanded in this “16 Rules for Investment Success,” which is a good reminder to investors about how to think about investing.

As investors stressed about the 1987 crash, Rukeyser couldn’t have called it more perfectly in his closing monologue on that Friday night:

“Happily, though, we don’t have to know the unknowable to make money as long-term, sensible, patient investors who believe that whatever our political and economic problems, America is still a fine and resilient and promising country, and that we want to own a part of its future. That’s how I see it, however bruised and battered most of us are feeling tonight.” —Louis Rukeyser

The horrible Black Monday 1987 crash was brief, lasting only a few months until recovery. While tactics may vary, investors who were smart and disciplined enough to listen to Uncle Lou and Sir John’s big picture advice did very well throughout the following decades.