Staying Invested in the Market

Staying Invested in the Market Wednesday, August 29, 2007

Posted by ei-forum in Investing.
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Having already talked and ranted (here) about the perils of trying to time the market we thought that it was time to give our readers some numbers to help reflect on this issue.

A study published by American Century Investments shows that if you had stayed invested in the market from 1990 to 2005, a 10,000 USD investment would have been worth 51,354 USD at the end of this time period – not a bad investment.

However, look at the following stats:

If you had missed out on the best 10 days of that period, the total value of your investment would have dropped to 31,994 USD…

If you had missed out on the best 30 days (out of the15 YEAR PERIOD), you would be left with 15,730 USD!

And if you had missed the best 50 days, you would actually have had a negative return with only 9,030 USD left.

We believe that the above speaks for itself … it’s practically impossible to pick out the best performing sessions and missing them has a devastating effect on your total return. Consider this: Nobel Prize winner William Sharpe concluded that someone trying to time the market would have to be right on 82% of his calls to try and match a buy and hold strategy – we think that we’ll continue to buy and hold…..