The problem isn't the idea, it's the execution

Market timing isn't wrong in theory, if you could reliably predict downturns and recoveries, you'd want to act on that. The issue is that reliably doing this in practice, over and over, is extraordinarily difficult, and being wrong is costly in a very specific, asymmetric way.

Bar chart showing a $10,000 investment in the S&P 500 from 2005 to 2024, worth $71,750 if fully invested but only $32,871 if the 10 best days were missed and $16,804 if the 30 best days were missed
S&P 500 Total Return Index, 2005–2024. Missing just the 10 best days cut the final value by more than half. Source: J.P. Morgan Asset Management analysis (Morningstar data).

Why the best days are so easy to miss

The figures above come from a widely-cited J.P. Morgan analysis of the S&P 500, the index of 500 large US companies, over the 20 years to the end of 2024. An investor who stayed fully invested turned $10,000 into roughly $71,750. One who missed only the 10 single best days ended with less than half that. The reason is that a large share of a market's best days tend to cluster very close to its worst days, often within the same volatile stretch. This makes intuitive sense: sharp rebounds often happen precisely because sentiment was so negative just before. An investor who sells during the scary part of a downturn, intending to buy back in once things feel safer, frequently ends up missing the sharpest part of the recovery, because it happens before things feel safe again.

What "staying the course" actually means

This isn't an argument for never adjusting a portfolio, rebalancing, changing your allocation as your goals shift, and reducing risk as you approach a specific need for the money are all reasonable, planned actions. The distinction is between a planned adjustment made for a specific reason, and a reactive decision made because markets fell and it felt uncomfortable to stay invested.

The takeaway. The cost of being wrong about market timing is not symmetric, missing the best days does far more damage than avoiding a few bad ones helps. This is part of why a documented, public record of calls, like our own Trades journal, matters more than any single prediction.

This article is for general educational and informational purposes only. It is not investment, tax, or legal advice, or an offer of any regulated financial service. Views expressed are those of Surava Capital.

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