Most investors agree with the most basic of investing advice. That is, “buy low, sell high.” On the other hand, most veteran investors also know that stocks can continue rallying even when they seemingly shouldn’t.
That’s a conundrum everyone’s facing right now. The S&P 500 (SNPINDEX: ^GSPC) and its corresponding funds, like the Vanguard S&P 500 ETF (NYSEMKT: VOO) or the SPDR S&P 500 ETF Trust (NYSEMKT: SPY), are back within sight of record highs reached in early June. It still feels like we’re overdue for a full-blown correction. But there’s also no denying the persistent bullishness hints of more gains ahead. What should investors do?
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Hold your nose and dive in anyway.
The numbers
It’s admittedly easier said than done. Nobody wants their portfolio to suffer setbacks that could potentially be avoided.
Just keep things in perspective, and keep your time frame in mind. Your bigger risk isn’t being in the market at the wrong time. It’s being on the sidelines and missing out on too much of the market’s inherent bullishness.
Numbers crunched by investment manager Invesco tell the tale. From 1995 to 2025, an initial investment of $100,000 in the S&P 500 (or an index fund like VOO) would have grown to just over $1.9 million, if you reinvested dividends. If that holding had missed out on just the market’s 10 biggest single-day gains during this 30-year stretch, however, the value of that investment gets dialed back to only $855,000. That’s less than half of what you would have earned by simply remaining in the market. And if you missed the 20 best days during this time frame, your holding would be worth about half a million dollars.
Sure, sidestepping the stock market’s worst days could help. The problem is, you don’t know when those worst days are going to materialize any more than you can know when the best days will. Trying to guess either is a strategic mistake.
See, the S&P 500’s biggest single-day gains often occur right around the same time — and even in conjunction with — its worst days, all of which are largely unexpected. And even the big winning days that aren’t linked to big single-day setbacks often materialize at unexpected times. For example, according to research done by mutual fund giant Hartford, since 1996, nearly half of the market’s best days happened during bear markets, while more than one-fourth of them took shape in just the first two months of new bull markets … when you would have been unlikely to trust that such moves were evidence of a long-term recovery.
