The Cost of Losing the 10 Best Days of the S&P 500 Index
Chart of the Week for September 4, 2015 - September 10, 2015
The value of keeping long-term investing goals in mind is important as daily equity market fluctuations generate short-term concern. While the value of stocks may change suddenly at times, it is a good idea to carefully consider your portfolio and how it relates to your goals before making any changes. Making decisions based on short-term performance, or attempting to time the market could lead to bad decisions. Consider the chart above, which was refreshed from November 2012.
If $10,000 were invested in the S&P 500 Index on June 30, 1990, it would have grown to $97,556 by June 30, 2015. If the same investment missed the ten best performance days, it would have been worth only $46,308 at the end of the period -- less than half the value of a buy and hold strategy. Missing the 10 best performance days out of approximately 6,300 trading days (25 years) would have reduced the annualized return from 9.5% to 6.3%.
Because it is difficult to predict when the market will go down and also when it is going to go back up again, many investors who try to time the market end up selling low and rebuying high. It may be better to be patient, recognizing that short-term market changes are generally far less important than long-term trends for many investors.
Posted by: sarah_oz@yahoo.com
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