Three of the five best days the Dow Jones Industrial Average has ever experienced occurred within a single 10-day stretch: Oct. 20, 1987 (up 5.88%), Oct. 21, 1987 (up 10.15%), and Oct. 29, 1987 (up 4.96%).

But that was not a great week for investors. It came in the wake of Black Monday (Oct. 19, 1987) -- the single worst day in the Dow's history -- when, by 4:00 p.m. ET, the market overall became $500 billion less valuable. The Dow dropped 22.61% that day, and followed it up a week later with an 8% drop -- the second-largest single-day drop in history.

When the dust settled, the biggest of big names had taken a bath. Boeing (NYSE: BA), 3M, and Dupont (NYSE: DD) each lost 20% or more of their value in October 1987.

We bring this up not only because we recently passed the 20th anniversary of Black Monday, but also because the recent investing landscape was strikingly reminiscent of that day. The term bubble was omnipresent. Corrections were predicted, followed by opposing bullish predictions driven by fundamentals. Now? Recession is the word du jour. And stocks? Well, depending on which source you're reading, it's either the greatest time to buy or the greatest time to sell anyone can remember.

Bring on Black Monday?
So what's it all mean? Full disclosure: We're not sure it's possible to make much sense out of conflicting short-term signals.

But whether next Monday is going to be another "black" trading day or one of the best in history, we try to remember that there are only three things that matter when it comes to investing successfully:

  1. The quality of the companies you buy.
  2. The price at which you buy them.
  3. The length of time you own them.

For those reasons, patient long-term investors should be eagerly awaiting the next Black Monday even more so than the next Microsoft or whatever.

Say what?
Let's face facts: There will be but a handful of the next great growth stocks, and the odds of picking just one are ... not good. But when the next Black Monday hits, hundreds of quality companies will suddenly become available at prices that all but assure success for long-term-minded investors.

That's what history has taught us. As Wharton professor Jeremy Siegel wrote, there is one reason why Standard Oil was a better investment than IBM despite IBM's superior growth: "Valuation, the price you pay for the earnings and dividends you receive."

The most expensive book ever written
The Internet bubble was another painful reminder of that lesson. Our research showed that if you took a stake in each of the stocks highlighted in Greg Kyle's 100 Best Internet Stocks to Own when it was published in the spring of 2000, you lost 62% of your capital.

For a book that cost about $15, that hurts. While, AXENT (which merged with Symantec (Nasdaq: SYMC)), and 11 other companies simply earned a positive return, 18 names went entirely bankrupt.

The culprits? Quality and valuation. Many of these were poorly run and profitless companies that were nonetheless selling at stratospheric levels. Consider that even well-run technology firms such as SanDisk (Nasdaq: SNDK), Oracle (Nasdaq: ORCL), and Marvell Technology (Nasdaq: MRVL) disappointed shareholders, because they were simply priced too aggressively. (We should note that neither SanDisk, Oracle, nor Marvell were included in Kyle's book.)

And that's the irony of the chase: You're far more likely to find the next big bust than the next big thing.

But that was seven years ago at the height of the "Tech Bubble." It's got nothing to do with today. Right?

Look at a long-term chart, and you'll see that the Dow and S&P 500 are near all-time highs, despite the recent market volatility. We're seeing the media report on bubbles in China, India, and even in the tech sector again. But remember, just three things matter for a successful investment plan:

  1. The quality of the companies you buy.
  2. The price at which you buy them.
  3. The length of time you own them.

If you insist on buying quality companies at good prices for the long term, it's tough to overpay, even in a bubble.

We're not trying to make successful investing sound easy. It's not. It takes time, effort, and resources.

But successful investing is also not outside the realm of any person willing to devote some time, effort, and resources to building a brighter financial future. At Motley Fool Stock Advisor, Fool co-founders David and Tom Gardner have a stellar track record of recommending quality businesses at good prices. Their stock recommendations are beating the market by more than 37 percentage points on average since 2002.

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This article was first published Oct. 19, 2007. It has been updated.

Tim Hanson owns shares of 3M, but no other companies mentioned in this article. Brian Richards owns shares of 3M and Microsoft. Both Tim and Brian wear plaid on the outside 'cause plaid is how they feel on the inside. is a Motley Fool Stock Advisor recommendation. Microsoft and 3M are Inside Value picks. The Motley Fool's disclosure policy is writing checks its body can't cash.