Markets sometimes feel like they’re lurching from one crisis to the next. Each time uncertainty surfaces, your instincts may tell you to tweak your portfolio or hit pause on new investments until “things calm down.”
But here’s the thing: Tinkering with your financial plan or adjusting your investment strategy in response to current concerns can cost you dearly.
If you had missed only the 10 best days in the market over the past 25 years, you would have lost out on nearly 50% of the returns the market generated.
The chart below shows the impact of missing the best days in the S&P 500 over the past 25 years, compared with staying fully invested throughout:
Now, we know that nobody would ONLY miss the 10 best days, but the point is clear: every one of the 10 best days, over the past 25 years, happened during a temporary market downturn, in the midst of turmoil. That’s right when many investors are most fearful to invest new money, and tempted to leave the market in search of “safety”.
History teaches us that the biggest gains often follow the biggest falls, precisely when they’re least expected. Missing those sharp rebounds can do lasting damage to your long-term returns.
That is why it’s crucial to stay invested and follow your financial plan, even when the path looks uncertain. It is the only sure way to benefit from all the gains that the market has to offer.
