Missing only a few days of strong returns can drastically impact overall performance.
The impact of missing just a few of the market’s best days can be profound, as this look at a hypothetical investment in the stocks that make up the S&P 500 Index shows. Staying invested and focused on the long term helps to ensure that you’re in position to capture what the market has to offer.
A hypothetical $1,000 invested in 1990 turns into $20,451 through 2020. However, if during those 30 years you miss the S&P 500’s five best days, your return dwindles down to $12,917. Miss the 25 best days and it’s down to $4,376.
There’s no proven way to time the market—targeting the best days or moving to the sidelines to avoid the worst—so history argues for staying put through good times and bad. Investing for the long term helps to ensure that you’re in the position to capture what the market has to offer.