Fidelity conducted a study to see how important it is for investors not to miss out on the biggest stock market days of the year. In the study, Fidelity researched what would happen to a $10,000 investment in the S&P 500 from 1980 to 2020 if you missed out on the best stock market days over those 40 years. The results were impressive:
Miss the best 5 days: 38% lower return.
Miss the best 10 days: 55% lower return.
Miss the best 30 days? 83% lower return.
Miss the best 50 days? 93% lower return.
An investor missing just the best 5 days over those 40 years would received only $432,411 instead of $697,421 from a $10,000 investment (-$265,010/ -38%).
These numbers are very impressive, considering that these are the numbers for the broad diversified S&P 500. The S&P 500 is an index of 500 big companies with relatively low volatility to other individual stocks. For individual stocks, the consequences of missing the biggest days of the year are much larger. Individual stocks have much bigger moves on a daily basis than the S&P 500.
The message to investors is crystal clear: Do not try to time the market and do not sit on the side-lines, especially during earnings season when stocks move the most.
Sven Franssen