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Trying to sidestep a market drop can hurt a long-term investor if they sell and then miss a sharp recovery. Market timing requires two decisions—when to get out and when to get back in—and a correct exit alone is not enough. Historical missed-best-days examples show why time out of the market can matter, but they are not forecasts or proof that every investor should stay invested regardless of goals or risk.
What market timing means—and why it is difficult
Market timing is moving money in or out of the market, or between investments, to benefit from predicted short-term price changes. FINRA explains the strategy and its risks in its market-timing guide. A forecast can be right about an approaching decline and still fail as an investment decision if the investor waits too long to return.
The exit is only half the decision
An investor who sells must decide what would make it safe to buy again. Fidelity notes that even someone who identifies a market top accurately may not know when to re-enter. If prices rise before the investor returns, the portfolio misses some of that recovery; if the investor buys back too soon, the market may still be falling.
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That two-part problem makes timing different from simply deciding whether an investment suits a long-term plan. Short-term moves are uncertain, and responding to each headline can turn a long-term allocation into a sequence of forecasts and trades.
What missed-best-days examples show—and what they do not
Historical illustrations compare an investment that remained invested with one that missed selected days that later turned out to be among the market’s strongest. They make the potential cost of being out of the market visible. They do not show that an investor could have identified those days in advance, or that every timing strategy loses.
Vanguard’s 37-year annualized-return comparison
Vanguard Investment Advisory Research Center reports a 37-year historical comparison, using FactSet data, in which a hypothetical investment earned an 11.1% annualized return with all days invested. In the same illustration, the annualized figure was 8.9% after missing the 10 best days, 7.3% after missing the 20 best days, and 6.0% after missing the 30 best days. These are results for that period and method, not expected returns or a penalty every investor will incur. See Vanguard’s explanation, “Staying the course does not mean set it and forget it.”
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Other examples use different periods and assumptions
Vanguard also compared a hypothetical $100,000 investment in 2000 that remained invested with one that missed the 25 best market days; its illustration showed a $229,000 difference by the end of the comparison period. Fidelity’s separate hypothetical S&P 500 example starts with $10,000 and covers 1988–2025: it reports $616,013 for an investment kept in the market and $44,626 after missing the best 50 days. Those figures come from different sources, dates, and missed-day counts, so they should not be combined or treated as forecasts. Vanguard’s 2000–2019 illustration is available in its How America Invests report; Fidelity describes its example in “Should I sell my stocks now?”
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How timing compares with scheduled investing
Scheduled investing—such as contributing a fixed amount on a regular calendar—is a way to spread purchases over time, not a forecast that identifies when to exit and re-enter. FINRA’s dollar-cost averaging guide describes both potential benefits and trade-offs.
| Approach | What it involves | Main trade-off |
|---|---|---|
| Market timing | Predicting short-term moves and deciding when to shift money out of or among investments. | Requires both a useful exit and a useful re-entry; remaining in cash can miss advances, while staying invested retains exposure to declines. |
| Scheduled investing | Investing set amounts on a regular schedule rather than choosing each purchase based on a forecast. | May reduce short-term downside exposure and regret, but can lag an immediate lump-sum investment in a rising market when some money remains in cash. |
Neither approach eliminates investment risk. Scheduled contributions can help make investing more systematic, but they do not ensure a profit or prevent losses. The choice between investing available money at once and spreading purchases over time depends on circumstances and the investor’s willingness to accept the trade-offs.
What to do before reacting to a market headline
Before selling because of volatility, compare the proposed trade with the plan the investment is meant to serve. Vanguard describes allocation planning in relation to goals, time horizon, and risk tolerance; FINRA cautions investors not to let short-term emotions disrupt long-term objectives.
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- Check the goal and time horizon. Ask when the money is needed and whether the investment remains appropriate for that purpose.
- Review liquidity needs. Money needed soon may call for a different plan from money invested for a distant goal; a missed-days illustration does not decide this personal question.
- Assess risk tolerance and allocation. Staying invested preserves market exposure, including the possibility of losses. If the current level of risk is unsuitable, revisit the allocation as a deliberate planning decision rather than relying on a short-term forecast.
- Use a process for contributions. A regular schedule can avoid making every purchase depend on a market prediction, while recognizing that cash waiting to be invested can underperform during a rising market.
- Consider individualized guidance. FINRA suggests consulting an investment professional when developing a strategy for individual goals. Vanguard’s Principles for Investing Success and its discussion of the difficulty and rewards of staying the course offer additional planning context.
Vanguard reported that fewer than 1% of the more than five million Vanguard retail households it examined abandoned equities completely during the volatility described in its 2020 report. That finding describes those Vanguard households in that period; it is not a measure of all investors or evidence that any one allocation is right for everyone.
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Who should not treat “stay invested” as a rule
Missed-best-days comparisons do not override a genuine need for liquidity, a change in goals, or an allocation that exceeds someone’s ability or willingness to bear risk. They concern particular U.S. equity-market histories and hypothetical assumptions. They do not establish future results or apply automatically to other markets, asset classes, fees, taxes, or personal circumstances.
Staying invested is therefore not a universal instruction to ignore every change. The more useful distinction is between a planned adjustment based on objectives and a reactionary trade that assumes the investor can predict both a downturn and the recovery that follows.
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