The myth of missing the best ten days

Every once in a while, you hear talk of how much worse off you’d be if you’d missed the ten best days in a given period.

It usually happens during a rough patch, in the hope it’ll calm investors down and ensure they stay the course rather than panicking and selling at the wrong time.

At some point over the past 20 years, I’ve probably written about this myself.

The numbers are always compelling.

If you’d invested $10,000 in the S&P 500 index in the US 30 years ago and left it alone, you’d have $231,000 today.

However, if you’d missed the ten strongest days during those 30 years, you’d only have $113,000.

That’s still eleven times more than you started with, but it’s 51 per cent less than if you’d simply stayed put.

The message is admirable, and it’s always good advice to keep your eye on the long game rather than tinkering along the way.

Even so, a point that’s often missed is that the best days usually come during the rough periods. That means they’re often in close proximity to the ten worst days.

The ten best days of the past three decades were either during the GFC in 2008 and 2009, or in early 2020 when harsh lockdowns shuttered the global economy.

Seven of those ten best days came within just a week of one of the ten worst days.

If your crystal ball allowed you to choose between one or the other, you’d be much better off avoiding the worst ten.

That would’ve meant your $10,000 has growth to nearly $550,000, more than double that of the buy and hold investor.

However, that’s highly unrealistic too.

The strongest and weakest days tend to come during most volatile periods, so they go hand-in-hand most of the time.

If you really did miss those ten best, you’re probably no worse off as you almost certainly would’ve missed the worst ten as well.

In our previous example, missing both the best and worst ten days would’ve seen our $10,000 increase to $263,000 today.

That’s higher that the “stay the course” outcome, but not dramatically so.

Market corrections, generally thought of as declines of ten per cent or more, are normal.

The S&P 500 has experienced 33 since 1960, so they come every two years or so, on average.

Ten of those 33 evolved into more painful bear markets, where the S&P 500 fell by 20 per cent or more.

The other 23 led to an average decline of 14.7 per cent and lasted an average of four months before the market recovery took hold.

The most recent correction came in the second half of 2023, when the market fell 10.3 per cent before bouncing again.

I’m sure it won’t be too long before we see another, especially after the great run from US equities these last two years.

Right now, the S&P 500 has slipped about five per cent from last months record high on the back of concern over tariffs, among other things.

The volatility might blow over quickly, or we could see further weakness before markets stabilise.

If that happens, you’ll probably see an article warning about what’ll happen if you miss the best ten days.

Despite the erroneous thinking, take note of the sentiment.

The author is probably trying to politely remind you that timing the market is extremely difficult, and that you’re often better to sit tight and stay put.

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