The markets have been putting even seasoned investors through their paces lately. Between the Federal Reserve’s next moves, earnings questions, and geopolitical tensions, we’re seeing the kind of complexity that makes investment decisions particularly challenging.
Look at what’s happening in the markets right now. Volatility is climbing, emotions are running high, and investors are making quick moves to exit positions—some walking away with gains, others accepting losses. However, when you sell out of the market, you’re not just taking a strategic pause. You’re potentially walking away from the kind of future gains that build real wealth over time.
I’m writing this because I know there are investors out there right now, perhaps even you, wondering if it’s time to step away from the markets—maybe for a while, maybe longer. Your confidence might be shaken, or you might be thinking about waiting for “calmer waters.” I get it. These feelings are completely natural. But—and this is important—acting on them could be one of the costliest financial decisions you’ll ever make.
Let me show you why with some numbers that might surprise you.
A Few Days Can Make or Break Decades of Returns
It may sound unbelievable, but missing out on just a few of the market’s top days can cut your total return by half or more. The market’s growth over many years is often heavily dependent on a small number of very strong up days. If you’re on the sidelines during those days, your portfolio’s value can end up dramatically lower than if you had stayed invested all along.
For example, J.P. Morgan Asset Management found that over the 20-year period from 2004 to 2023, the S&P 500 delivered an approximately 9.8% annual return for an investor who stayed fully invested. But if you missed only the 10 best-performing days in those 20 years, your annual return would shrink to about 5.6% – roughly half of what you could have earned. In dollar terms, the difference is staggering. Fidelity Investments calculated that a hypothetical $10,000 invested in the S&P 500 from 1980 to 2022 would have grown to about $1.08 million by staying invested the whole time. If the investor instead missed just the 10 best single days in that 42-year span, the final value would be only around $483,000 – less than half as much. Missing the top 20 days was even more punishing, cutting the ending value by over 70% compared to staying invested.
The Cost of Missing the Market's Best Days
Growth of $10,000 invested in the S&P 500 (1980-2022)
Even missing just a few of the market's best days can dramatically impact long-term returns.
Missing just 10 of the best days cuts your returns by more than half.
Source: fidelity.com
In short, the majority of the market’s long-term gains come from a relatively small number of extremely good days. If you’re not invested during those days, your overall returns can plummet.
Another analysis noted that from 1999 to 2018, missing the 10 best days would have literally cut an investor’s total return in half. And missing more than that (say 30 or 40 top days over decades) would leave you with only a tiny fraction (one-quarter or even one-tenth) of the wealth you’d have by staying put. Clearly, “time in the market” – remaining invested through the ups and downs – is far more important than perfectly timing entries and exits.
Why the Best Days Often Occur in Bad Times
If the key to long-term success is being invested during the best days, one might ask: When do these big positive days happen, and why are they so easy to miss? The surprising answer is that many of the best days come right after the worst days. They tend to cluster around periods of fear, panic, and huge volatility – times when a lot of investors have already sold out. This makes market timing extremely tricky: the urge to sell is highest during a crash, yet that’s exactly when you need to stay invested to catch the rebound.
According to J.P. Morgan’s research, 7 of the S&P 500’s 10 highest-returning days over the past 20 years occurred within just two weeks of one of the 10 largest one-day drops. In other words, the stock market’s biggest positive jumps often happened immediately after big plunges. Their data shows that six of the seven very best days since 2004 actually followed on the heels of a major down day. This pattern has played out repeatedly: some of the strongest rallies happen in the depths of bear markets or uncertainty.
A study by Hartford Funds found that about 42% of the market’s strongest days in the past 20 years occurred during official bear markets, and another 36% of the best days happened in the first two months of a new bull market – before it was even clear that the bear market was over. In total, roughly 78% of the biggest up days occurred when things looked bleak (either during the downturn or very early in the recovery), underscoring how hard it is to time the “all clear” signal.
The chart above visualizes this phenomenon. The blue bars show the top 10 single-day gains for the S&P 500 between 2002 and 2022, and the orange bars show the top 10 single-day losses over the same period. You can also see that many of the worst days and best days occurred within days or weeks of each other. In late 2008, for instance, the market was whipsawing violently: a -8% day might be followed by a +6% or +11% day.
Why does this happen? In a crisis, markets often overshoot to the downside due to fear and forced selling, setting the stage for sharp relief rallies when any good news or policy support emerges. Also, when prices fall dramatically, even a partial mean reversion can register as a huge percentage gain. But crucially, those rebounds tend to be concentrated in just a few trading sessions. If you had sold during the panic, you would likely miss those whiplash rebounds that can recover a large chunk of losses.
2008–2009 Financial Crisis
The S&P 500 plunged nearly 38% between late September 2008 and the March 2009 bottom during the Global Financial Crisis. But even as the world seemed to be ending financially, the market was experiencing massive upswings on its recuperative days. In fact, 7 of the 10 best days in the past two decades occurred during this Sept 2008–Mar 2009 timeframe. For example, on October 13, 2008, the S&P 500 skyrocketed over +11% – one of its largest single-day gains in history – just days after a series of horrific down days in late September and early October. An investor who sold in late September 2008 to avoid further losses would have missed that 11% up day and a host of other big rallies that followed.
One analysis illustrated that if you sold on Sept 29, 2008 (after a -8% plunge) and sat in cash for six months, you would have avoided a few more large down days but also missed seven huge up days (ranging +6% to +11%) in the ensuing rebound. Those missed rallies were vital – by the time the dust settled, the market had begun recovering well off the lows by mid-2009. In short, the investor who panicked in 2008 would have locked in losses and failed to participate in the initial bounce-back, dramatically reducing their long-term gains.
2020 COVID-19 Crash
The COVID-induced market crash of February–March 2020 was extremely swift and volatile. The S&P 500 lost about one-third of its value in just over a month, including some of the worst single-day drops since 1987. Yet, true to form, the market also saw some of its best days on record during that same crisis period. March 2020 alone contained 3 of the 10 best days of the past 20 years for the S&P 500. For instance, after the index free-fell nearly 12% on March 16, 2020 (the third-largest % drop in modern history), it rebounded over +9% on March 24, 2020 – and then another +7% gain on April 6, 2020, as stimulus measures took hold.
Investors who “bailed out” in late February or early March amid the pandemic fear would have missed these powerful up moves. Notably, March 13, 2020 (as mentioned earlier) saw the market jump over 9% the day after a huge drop. By late April 2020, the market had recovered a significant portion of the losses. Those who stayed invested through the volatility not only avoided selling at the bottom but also captured these crucial rebound days that propelled the recovery. Conversely, those waiting on the sidelines until the news felt “safer” likely re-entered at higher prices after the best part of the early rally had passed.
2000–2002 Dot-Com Bust
The dot-com crash and its aftermath (2000 through 2002) was a slower-burning bear market, but it too had periods of extreme volatility and big single-day moves – especially for the tech-heavy Nasdaq index. In fact, looking at the Nasdaq Composite’s history, 22 of the Nasdaq’s 25 largest single-day gains ever occurred during the dot-com bust (2000–2002), the 2008–09 crisis, or the early 2020 pandemic period. This underlines that huge up days are largely a feature of bear markets and their immediate aftermath. During the dot-com collapse, the S&P 500 and Nasdaq had some sharp rally days (for example, an +11% day for the Nasdaq in January 2001) even though the overall trend was down at the time.
Investors who fled after the tech bubble burst in 2000 and waited on the sidelines might have missed those interim jumps. More importantly, many missed the strong long-term recovery that followed: from the market bottom in late 2002, the S&P 500 rose about 34% in 2003. Missing the initial phase of that rebound – which included multiple +5% single-day gains in October 2002 – would significantly delay an investor’s portfolio recovery. The lesson from the dot-com era is similar: the market eventually recovered and reached new highs, but much of the comeback was concentrated in bursts. You had to stay in the game to benefit.
These cases reinforce a common theme: the best days tend to occur in close proximity to the worst days. An investor who loses their nerve during a crash can very easily miss out on the ensuing rebound, thereby turning a temporary loss into a permanent one.
Riding Out Uncertainty vs. Chasing Clarity
It’s not just financial meltdowns that test investors’ resolve – political and geopolitical events can also spur short-term market turmoil. War headlines, trade tariffs, elections, and other geopolitical shocks often cause sudden drops or spikes in volatility. However, history shows that these events typically have only a short-lived impact on markets, and staying invested through the turbulence is usually rewarded as the market resumes its long-term upward trajectory.
Armed Conflicts
Consider military conflicts: A study by Hartford Funds found that since World War II, in 73% of armed conflicts, the U.S. stock market was up one year after the initial conflict event (and often significantly so). Even when wars or conflicts spark a sharp sell-off initially, equities tend to regain footing relatively quickly. For example, after the surprise attack on Pearl Harbor in 1941, the S&P 500 was higher by the end of the following year and went on to produce strong returns in subsequent years. The same pattern occurred after events like the Cuban Missile Crisis (1962) or the first Gulf War (1990–91) – any market declines around the event were reversed in months, and long-term investors who stayed the course were rewarded.
Geopolitical Crises
J.P. Morgan’s analysis of 80+ years of market history further drives our point home: geopolitical events usually have no lasting impact on large-cap stock returns. The market might wobble due to uncertainties like elections, trade disputes, or military conflicts, but over time, it refocuses on fundamentals (corporate earnings, economic growth) once the news is absorbed. For instance, during the U.S.–China trade war news in 2018, stocks seesawed with each tariff headline, yet a few years later, that volatility appears as a minor blip on the long-term chart.
Presidential Election Cycles
Similarly, U.S. presidential election cycles often bring anxieties and short-term swings, but the S&P 500 has historically trended up over the long run regardless of which party won. In fact, a private bank study found no consistent long-term drag on U.S. equities from geopolitical crises – markets have endured world wars, recessions, oil embargoes, and pandemics, and still delivered roughly ~10% average annual returns over many decades.
Conclusion: Time in the Market Beats Timing the Market
It’s natural to want to avoid the pain of market downturns or to feel uneasy amid political turmoil. But the overwhelming evidence from market history is that trying to time the market’s exit and re-entry is a risky endeavor. Missing just a few critical days can set your portfolio back years, even decades. On the flip side, staying invested through the tough periods helps ensure you’ll participate in the recoveries.
None of this is to say market declines aren’t scary – they can be. But history shows that every decline has been temporary, and the market’s long-term trend is upward. Bear markets come and go, but over the past 94 years, stocks have risen in roughly 78% of all years . If you have a sound investment plan and a long time horizon, the best course during volatility is often to hold steady (or even rebalance into the decline) rather than sell. Remember this adage: “Time in the market, not timing the market, is what builds wealth.” Stay focused on the big picture. Over the long run, enduring the market’s occasional storms – and being on board for that sunny day that inevitably follows – can make all the difference in achieving your financial goals.
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Sources:
1. https://foolwealth.com/hubfs/one-pager/timing-the-market.pdf?hsLang=en
2. https://www.fidelity.com/bin-public/060_www_fidelity_com/documents/dont-miss-best-days.pdf
3. https://www.nasdaq.com/articles/what-happens-when-you-miss-best-days-stock-market-2019-04-11-0
4. https://winthropwealth.com/assets/Missing-the-best-days-crushes-investor-returns.pdf
5. https://fmpwa.com/the-cost-of-missing-the-10-best-days-in-the-stock-market
