{"id":604,"date":"2021-01-25T07:32:00","date_gmt":"2021-01-25T07:32:00","guid":{"rendered":"https:\/\/robdix.com\/?p=604"},"modified":"2021-01-23T07:34:40","modified_gmt":"2021-01-23T07:34:40","slug":"best-days","status":"publish","type":"post","link":"https:\/\/robdix.com\/best-days\/","title":{"rendered":"What really happens if you miss the best days in the market?"},"content":{"rendered":"\n

You’ve probably heard the investing maxim that if you miss just a few of the best days in the stock market over a decade or more, your returns will be drastically affected.<\/p>\n\n\n\n

For example, JP Morgan calculated<\/a> that if you missed the 10 best days over a 20 year period up to the end of 2018, your returns would have been halved<\/em>: instead of a $10,000 investment turning into a $30,000 investment, it would have become just $15,000. All because of 10 days!<\/p>\n\n\n\n

Statistics like this are often wheeled out to scare small children and support the argument that you shouldn’t try to time the market. Try to get clever and miss just those few critical days, and you’ll have done yourself serious damage.<\/p>\n\n\n\n

Well, like most maxims, it’s grounded in truth \u2013 but has been extended way beyond its original context, to the point where it risks seriously damaging your wealth.<\/p>\n\n\n\n

The best days aren’t random<\/h2>\n\n\n\n

The “best days” argument implies that you should remain fully invested at all times, because you never know when those best days are going to come. For all you know, next Tuesday could be one of the best days in years. If you pull out your cash on Monday because you have another use for it, you’ve engaged in an act of financial self-harm!<\/p>\n\n\n\n

This makes it a close cousin of another well-worn saying: “it’s time in the market, not timing the market that counts”.<\/p>\n\n\n\n

But here’s the thing: the best days don’t just occur randomly. They usually closely follow the worst<\/em> days<\/strong>.<\/p>\n\n\n\n

For example, if you’d pulled your money out of the Dow Jones just before 21 October 1987 you would have missed a 10% gain \u2013 oh no!<\/p>\n\n\n\n

But you’d also have missed a 22% fall<\/strong> just two days earlier, and an 8% fall five days later!<\/p>\n\n\n\n

The same was true more recently, when the market grew by 11% on 24 March 2020. Not one you’d want to miss…except that there was a 13% fall eight days earlier, and a 10% fall just four days before that.<\/p>\n\n\n\n

In both examples, if you’d not just missed the best days but also missed the entire month in which they occurred, you’d have been better off than if you’d stayed invested the entire time<\/strong>.<\/p>\n\n\n\n

Don’t panic!<\/h2>\n\n\n\n

So can we take anything useful from the admonishment not to miss the best days?<\/p>\n\n\n\n

Yes: it makes a strong case for not selling in a panic. Looking at the history of market movements shows us:<\/p>\n\n\n\n