Chart Shows How Trying to Time the Market Can Result in Big Losses

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  • Investors should avoid the impulse to time the market, new data from Bank of America shows.
  • Looking at data going back to 1930, the firm found that if an investor sat out the S&P 500′s 10 best days per decade, total returns would be significantly lower than the return for investors who waited it out.
  • And the market’s best days typically follow the largest drops, meaning panic selling can lead to missed opportunities on the upside.

Timing the market is difficult at the best of times for even the most experienced traders.

Now, Bank of America has quantified just how large the missed opportunity can be for investors who try to get in and out at just the right moment.

Looking at data going back to 1930, the firm found that if an investor missed the S&P 500′s 10 best days each decade, the total return would stand at 28%. If, on the other hand, the investor held steady through the ups and downs, the return would have been 17,715%.

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When stocks plunge a natural impulse can be to hit the sell button, but the firm found the market’s best days often follow the biggest drops, so panic selling can significantly lower returns for longer-term investors by causing them to miss the best days.

www.cnbc.com/2021/03/24/this-chart-shows-why-investors-should-never-try-to-time-the-stock-market.html

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