The cost of market timing

Sources: Bloomberg, Ned Davis Research, and Wells Fargo Investment Institute. Market downturn analysis: data from January 3, 1928 to December 31, 2023. Past 30 years: data from January 1, 1994 to December 31, 2023. Past 20 years: data from December 1, 2003 to December 31, 2023. Past 10 years: data from January 1, 2014 to December 31, 2023. Past 7 years: data from January 1, 2015 to December 31, 2023. Past 5 years: data from January 1, 2019 to December 31, 2023. For illustrative purposes only. The S&P 500 Index is a market capitalization weighted index composed of 500 stocks generally considered representative of the U.S. stock market. An index is unmanaged and not available for direct investment. Past performance is no guarantee of future results. A price index is not a total return index and does not include the reinvestment of dividends. Investing in stocks involves risk and their returns and risk levels can vary depending on prevailing market and economic conditions.

Note: Corrections are declines of 10% or more. Bear markets are declines of 20% or more.

Key Takeaways

  • The majority of market drawdowns have been between 5% and 10% declines. These have tended to recover much quicker than more severe corrections.
  • Over long and short time periods, missing the best 10 days reduced the potential investment amount by 50%. Missing the 50 best days resulted in an ending period balance that was below the original investment.