Time in the Market, Not Timing the Market?

Market timing can be deceptively difficult. Analysis from BoA Research quantifies how much so. Looking at data going back to 1930, BoA calculates that if investors missed the S&P 500′s 10 best days in each decade, total returns would be significantly lower than the return for investors who stayed in the market throughout. (Click chart to enlarge)

So, if an investor held on through the ups and downs of the market from 1930-2020, their return would have been 17,715%. On the other hand, if the same investor missed the S&P 500′s 10 best days each decade, their total gain would be just 28%!! Much of investing is about avoiding large losses, so that compounding can work it's magic on a growing base. If you were to 'simply' side-step the 10 worst days in every decade over the last 70 years, your gains would be an gargantuan 3,793,787%!!! Basically, $1 would grow to ~$400,000 as the S&P 500's best days turbocharged your returns. But the market’s best days typically follow the largest drops, so your timing has to be almost surgical.

We know that's nearly impossible, so the best path is to hold steady and dollar-cost average. And time in the market has historically ensured a positive return, as this analysis from Morgan Housel shows:

Based on the last 150 years of stock market data, a 10-year investment horizon gives investors an almost 90% chance of coming out ahead...with a 20-year horizon it's almost a certainty investors will have a positive return. So stay invested.