Staying the course

I just read an interesting article from Vanguard. Its message harkens to a well-known aphorism, i.e., time in the market beats time out of the market. Despite the old saw, the numbers relayed by Vanguard’s research are rather impressive. To best understand, one must take as axiomatic that poor market returns are often quickly followed by good market returns (trust me, they are), thereby obviating market timing attempts.

Per above, if one were attempting to time the market and missed some of the “best” market days due to market timing attempts, it seems one’s returns may suffer. Oh, how do they, you ask? Per the scenario laid out by Vanguard, a $100K investment in the S&P 500 index in 1988 would be worth a rather pretty penny as of 31 Dec 2024 (if one stayed fully invested during those 37 years). Now, if one were to miss, say, the best 10 or 20 market days, what might happen to your returns? It is rather astonishing:

• Value of $100K after staying invested the whole 37 years - $4.9M

• Value of $100K after missing just the 10 best days - $2.3M (53% less)

• Value of $100K after missing just the 20 best days - $1.4M (71% less)

• Value of $100K after missing just the 30 best days - $0.9M (82% less)

Yes, it may be a hackneyed expression (time in the market beats time out of the market), but sayings such as this come into existence because they often exhibit a kernel (or more) of truth.

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