Most investors agree on basic investment advice. Which means, “buy low, sell high.” On the other hand, many seasoned investors also know that stocks can continue to rally even when it seems inappropriate.
That is the dilemma that everyone is facing right now. I S&P 500 (SNPINDEX: ^GSPC) and its related funds, such as Vanguard S&P 500 ETF (NYSEMKT: VOO) or i SPDR S&P 500 ETF Trust (NYSEMKT: SPY ), have rebounded from record highs reached in early June. It still feels like we are overdue for a full overhaul. But there’s also no denying the persistent hint of additional benefits to come. What should investors do?
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Hold your nose and go in anyway.
Numbers
Admittedly, that’s easier said than done. No one wants their portfolio to face avoidable setbacks.
Just keep things in moderation, and keep your time in mind. Your biggest risk is not being in the market at the wrong time. It is marginal and misses the natural market dynamics.
The numbers kept secret by investment manager Invesco tell the story. From 1995 to 2025, an initial investment of $100,000 in the S&P 500 (or an index fund like VOO) would have grown to just over $1.9 million, if you reinvested the gains. If that holding had missed 10 big one-day gains over the 30-year period, however, the value of that investment was returned to just $855,000. That’s less than half of what you would earn by staying in the market. And if you missed the best 20 days during this period, your catch could be worth almost half a million dollars.
Of course, skipping the worst days of the stock market can help. The problem is, you don’t know when those worst days will happen any more than you know when the best days will happen. Trying to guess anywhere is a strategic mistake.
See, the S&P 500’s biggest one-day gains often coincide with — and even coincide with — its worst days, all of which are unexpected. And big win days that aren’t tied to big one-day handicaps often happen at unexpected times. For example, according to a study by the mutual fund giant Hartford, since 1996, almost half of the market’s best days occurred during bear markets, while more than one-fourth of them began in the first two months of new bull markets…
