The Benefits of Always Being in the Market

The Benefits of Always Being in the Market

February 13, 2023

Nobody likes the feeling of a down day in the market, let alone a down week, month, or year. It can be tempting to try to time the market, seeking to avoid the bad times and get in for the good times. Part of the problem with this approach is that many of the best days in the market can be around some of the worst days.

So in order to be successful, you would have to be right over and over in your timing of getting in and out of the market throughout the year. Sounds exhausting, emotional, and quite impossible!

The Best Days are Often Around the Worst Days

One interesting article by Elyse Ausenbaugh, Global Investment Strategist at JPMorgan titled The Case for (Always) Staying Investedshows that it’s important to participate in the best days in the market. But the best days in the market may not always be during times you might expect.

The article illustrates this with a chart showing the returns of the S&P 500 Total Return Index between January 2002 and January 2022. The chart indicates that “Seven of the 10 best days occurred within fifteen days of the 10 worst days.” This shows the difficulty of timing the market, as many of the best days and worst days have been closely clustered together.

A piece by Hartford Funds shows that “78% of the market’s best days have occurred during a bear market or during the first two months of a bull market when it was difficult to tell whether a bull market had even begun. This means sitting out could mean significantly missing out.” (Ned Davis Research, 2/22, time period from 1991-2021).

Missing the Best Days in the Market Can Hurt Performance Significantly Over Time

The impact of missing some of the best days in the market on your returns can be stunning. To illustrate, see the chart below from the previously referenced JPMorgan article:

Staying Invested is How You Can Assure Yourself of Participating in the Best Days

The only way we can assure ourselves of participating in the best days in the market is by staying invested! Staying invested also means that we will experience the bad days, too. That’s okay! Becoming more comfortable with this is one of the most important traits you can have in order to build wealth in the markets over time.

Jack Manley, Global Market Strategist at JPMorgan Asset Management, has reminded us that “success in both investing and retirement requires investors to focus on what they can control, like saving patterns and asset allocation. During periods of extreme volatility, emotions can often interfere with this success.”

Staying the course during times of uncertainty and volatility isn’t always easy, but we are here to help you navigate the storms and stick to sound investment principles.

Note: I wrote something back in May 2022 that is very similar to this, but I wanted to write about it again to reiterate its importance. Click here to reference what I wrote back in May.

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Important Disclosures

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. The opinions expressed in this material do not necessarily reflect the views of LPL Financial.