Van Morrison's 1989 classic "These Are the Days" is an ode to savoring life's best moments as they happen. The song's message is simple: don't let the good times pass you by. The same wisdom applies to investing--the market's best days are fleeting. And if you're sitting on the sidelines, you'll miss them entirely.
Last quarter was a great example. The S&P 500 had its worst quarter since Q2 2022 when Russia invaded Ukraine. This time, the primary driver was the war in Iran. Then Tuesday the S&P 500 jumped 2.9%--a perfect reminder of why we stay invested.
In a recent study by Franklin Templeton, investors who put $100 in the S&P 500 at the beginning of 2006 would have over $800 by the end of 2025 — an 11% annualized return. However, investors who missed just the best 10 trading days during that period had just under $360, or 6.6% annualized.
In other words, missing the top 0.2% of trading days over that 20-year period would cut your returns by 63%. So when the market goes up, it really goes up. And if you're on the sidelines, you will miss out completely. As I've written before, over the long term these timing missteps can deeply impact returns. It pays to stay invested.
What makes timing the market even harder is that most of the big up days come when the market is at its scariest. According to Hartford Funds, just over three-quarters of the market's best days happened during a bear market or in the first two months of a bull market. Bear markets are miserable, and when you're at the beginning of a bull market, you rarely know it.
Bottom line, the best days in the market are impossible to predict, and the cost of missing them is steep. So even when it's bleak--war, inflation, pandemic--it's imperative to remain invested. That's the key to building long-term wealth.
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Josh Norris is an Investment Advisory Representative of LeFleur Financial. Josh can be reached at josh@lefleurfinancial.com.
Josh Norris, CPA, CFP, CFA is the managing member of LeFleur Financial, a wealth management and tax advisory firm.