Options Bistro

bikeeagle1 5:59 am on Thursday, January 25, 2024

The only problem with analyzing returns based on “if you miss the X number of best days,” is that they are based on an impossible premise. In order to miss the “best” days in the market, you would have to:

1. Sell at the close the day before.
2. Stay out the designated “best” day.
3. Buy at the open the day after.

In order to do that, you would also have to know in advance which days those would be. Assuming you had a crystal ball, and knew those days in advance, why would you intentionally miss them? Not only is this kind of scenario impossible, no investor in his right mind would follow it even if he could.

I see this argument on the bogleheads forum often, but those guys are all about buy and hold, so it makes sense that they would like articles about how you shouldn’t try to time the market. The thing they always ignore is any analysis of missing the WORST days in the market. They like to use the “missing the best days hurts your returns” argument, but don’t want to consider the “missing the worst days helps your returns” analysis.

This chart was created by JP Morgan Asset Management, to try to convince everyone that we should keep our money invested with them instead of pulling it out during recessions. In other words, it’s a marketing piece.
- geewhiz112 6:26 am on Thursday, January 25, 2024
  
  Thank you for pointing that out.
  - geewhiz112 6:27 am on Thursday, January 25, 2024
    
    Cannot verify the charts, but know I’ve experienced most of them! 😉