Do you have results of missing out some of the worst days?

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In the email of the past weekend, you talked about how missing out some of the best days in the market can lead to significant underperformance. Do you have the results of missing out some of the worst days? Thank you!

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Asked on December 18, 2023 8:50 am
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Private answer

If we use basic math, we could come to the conclusion that missing the worst days would result in better returns than participating in the best days.

Why? Because after a loss, you require a larger gain to get back to even. This is an extreme example just to make the numbers easier to comprehend, but if the market fell 50% in a single day, you would need a 100% recovery to get back to even.

However, here is the main issue. To miss the worst days, you need to be timing the market. To participate in the best days, you need to do nothing except stay invested.

It is infinitely easier to participate in the best days than it is to properly time and miss the worst days. You'll often end up missing out on some of the best performing ones in an attempt to avoid the large losing ones.

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Posted by Dan Kent
Answered on December 21, 2023 7:14 pm
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Hi Dan, Thank you for your quick response. It’s a very good point that ”It is infinitely easier to participate in the best days than it is to properly time and miss the worst days.”. The whole point of timing the market is to try to avoid the worst days ; ) Using the basic math you mentioned above, I guess the result will be better return if avoiding/missing the same number of the worst/best days when timing the market. Merry Christmas and Happy New You!
(George piao at December 22, 2023 7:57 am)