Timing The Stock Market

Students (and a lot of investment professionals) think that timing that market, that is leaving the stock market before it goes down, is a good strategy. And while we would like to sell our stocks before a price drop, it is easier said than done. A recent article highlights the danger of missing the good days in the stock market. Fidelity Investments calculated the return from investing $10,000 in the S&P 500 from January 1, 1980 through March 31, 2015. If you were invested every day, your portfolio balance would have grown to $503,741. However, if you missed the five best days in the market, your balance would have been about $309,431, a 40 percent decrease! Missing the 50 best days would have dropped your portfolio balance to $41,803, or about eight percent of the value of being invested every day. There are about 252 trading days per year, so missing 5 days (or 50 days) out of about 8,800 days can have a serious impact on the value of your investments.