The following data is from Dimensional Fund Advisors in the USA. From 1970 to 2013 the USA S&P 500 index compounded 10.40% per annum.
However, if you missed out some of the best days of the stock market, your returns will look drastically different. Missed out the best day is ok, but missed out the best 5 days, 15 days, 25 days and your returns are possibly 60% of what you could have garnered.
The lesson learnt here is that, it is probably very difficult to know when the best days will occur (and some of them are probably in the deepest end of the bear market) and missing out on them can be rather detrimental to your eventual wealth. This adds another plus point to staying in the market.
Kyith is the Owner and Sole Writer behind Investment Moats. Readers tune in to Investment Moats to learn and build stronger, firmer wealth foundations, how to have a Passive investment strategy, know more about investing in REITs and the nuts and bolts of Active Investing.
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Kyith worked as an IT operations engineer from 2004 to 2019. Currently, he works as a Senior Solutions Specialist in Insurance Start-up Havend. All opinions on Investment Moats are his own and does not represent the views of Providend.
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You can read more about Kyith here.
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Ben Bammens
Saturday 4th of July 2015
It's a little bit like saying: "when you play the roulette you will win a lot more money when you bet on the right number every time" :)
Kyith
Saturday 4th of July 2015
Here is a good accompanied reading for u https://investmentmoats.com/wealth-building-2/if-you-buy-near-market-bottoms-you-should-do-better-than-buy-and-hold-right/
Andreas Schmidt
Saturday 4th of July 2015
Hence timing the market is a fruitless endeavor, it’s time in the market that makes all the difference.
Kyith
Saturday 4th of July 2015
Thanks Andreas, the interesting thing will be what if you missed the worst days?