Three of the five best days the Dow Jones Industrial Average has ever experienced occurred in one 10-day stretch in 1987: Oct. 20 (up 5.88%), Oct. 21 (up 10.15%), and Oct. 29 (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 p.m. ET, the market 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 very bluest of blue chips had taken a bath. IBM (NYSE: IBM), Eastman Kodak (NYSE: EK), and Pfizer (NYSE: PFE) 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 investing landscape that preceded the current "correction" was strikingly reminiscent of those days. 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 read, it's either the greatest time to buy or the greatest time to sell that 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 will be another "black" trading day or one of the best in history, 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 Google or whatever comes along.

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

That's what history has taught us. As Wharton professor Jeremy Siegel wrote, there is one reason 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, and you then held those stakes through October 2007, you'd have lost 62% of your capital.

For a book that cost about $15, that hurts. While TD Ameritrade, Verio (which was acquired at a premium by NTT Communications), 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. Even some of the survivors that have strong brands, such as Akamai (Nasdaq: AKAM) and Time Warner (NYSE: TWX) (known as AOL back then), disappointed shareholders because they were simply priced too aggressively back in 2000.

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 some eight 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 sell-off. Regardless of the market environment, remember, 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.

Successful investing is possible for anyone 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 40 percentage points on average since 2002.

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

Neither Tim Hanson nor Brian Richards owns shares of any companies mentioned. Both Tim and Brian wear plaid on the outside, 'cause plaid is how they feel on the inside. Time Warner is a Motley Fool Stock Advisor recommendation. Akamai is a Rule Breakers selection. Pfizer is an Inside Value and Income Investor selection. The Motley Fool's disclosure policy is writing checks its body can't cash.