2026 is starting out at full speed! Just in the first quarter we’ve seen AI bubble fears; Bitcoin crashing; US actions in Iran, Venezuela, and Ecuador; silver volatility; and the list goes on. Investing is scary and all of the negative news doesn’t make it any easier. The news outlets like to focus on attention grabbing headlines that make the market look like it’s perpetually on the edge of collapse. It could be easy to sit on the sidelines and wait for these market trends to “pass,” but the truth is there will always be a new reason not to invest, and not being invested is far more dangerous than investing at the wrong time.
Let’s look at an example of three investors, we’ll call them Ace, Joe, and Mort. Each invests $2,000 per year into the S&P 500 starting in 2006 for a total of $40,000 net investment, a modest but consistent commitment. Ace is the greatest market timer of all time and puts his money to work on the market low of each year (the best day). Joe just wants an easy plan to follow, so he invests on the first trading day each year regardless of market conditions. Mort also tries his hand at market timing but is extremely unlucky. He invests his money on the market high of each year (the worst day). Take a guess as to how far apart you think they’ll be after 20 years? Do you think Mort will have a gain or a loss?
The above table summarizes their investment performance. The most compelling finding in the table is that Mort, the worst market timer of all time, still made over a 300% cumulative return! In addition, we find that the difference between the best market timer and the worst market timer’s annualized return is only 2%. In reality, we’re never going to be as good as Ace or as horrible as Mort, but we can invest like Joe! Joe doesn’t let the headlines guide his investment decisions. He just consistently shows up and invests, and it works.
Joe’s story makes the case for getting invested. But there’s a second half to that lesson, and the numbers behind it are even more surprising. Since 1990, annual rolling returns of the S&P 500 have ranged between -47.5% and +77.8%. That’s a terrifying range if you’re looking at one year at a time. With such a wide dispersion in one year returns it can be easy to get nervous when the market is falling. However, as you increase the length of the investment the range of outcomes narrows dramatically. At 5 years the outlook improves considerably, and since 1990 there has not been a single 15 year period with negative returns. The long-term case for investing is clear, but what happens if you miss even a few of those days.
Moving to cash may feel safe, but it could be one of the most costly decision you ever make. There are 252 trading days in a year and over the course of 20 years that’s roughly 5,029 total trading days. Take a look at the below chart, it shows the annualized returns for the S&P 500 if you were fully invested for 20 years, versus missing 5, 10, 20, 40, or 50 of the best trading days. Just missing the 5 best days would have reduced your return by over 2.5% per year. More shockingly, missing 50 days (that’s 50 days out of 5,029 or about 1% of all trading days) would have erased all your gains! This means that over the last 20 years essentially all of the S&P 500 returns can be attributed to just 50 days. No one can predict when these 50 days will happen and pulling money out of the market for any length of time risks missing one of these days. Trying to time the market may seem appealing, but being wrong 1% of the time could cost you 100% of your returns.
The evidence is clear. Whether it’s Joe’s simple consistency, the power of staying invested, or the sobering math of missing just 50 days, you don’t need to find the perfect moment to invest. The headlines will always be scary, there will always be a reason to move to cash, and the market will always have bad days. The two most important investment decisions you can make are simple: get invested and stay invested. Sitting on the sidelines can be far worse than investing at the “wrong” time.
Disclosures: Past performance is no indication of future results. The examples presented are hypothetical and are for illustrative purposes only. This content is for informational purposes only and is not meant to be investment advice or to be seen as a recommendation. Always consult a financial professional before making any investment decisions.