Think About This:

$10,000 invested in the S&P 500 at the begining of 2000 would have grown to $32,527 over 20 years — an average return of 6.07% per year. 


Missing the 'top' days can be costly

If the market were to rebound suddenly, missing even a few trading days could potentially reduce long-term returns. As illustrated in the following chart, this effect is compounded by missing any of the “top” days, where the market has its biggest gains in terms of performance. There were 5,036 trading days during the 20-year period from January 1, 2000 - December 31, 2019, yet missing only 10 of them would have reduced an investor’s return by 50%.

 

Chart of $10,000 investment with missing the best days of stock market returns

Source: Legg Mason. Past performance is no guarantee of future results. These charts and references are for illustrative purposes only and do not represent an actual investment or the performance of any specific investment. The S&P 500 Index is an unmanaged index of 500 stocks that is generally representative of the performance of larger companies in the U.S. An investor cannot invest directly in an index. Unmanaged index returns do not reflect any fees, expenses or sales charges. Dividends are subject to reinvestment.

 

The sobering lesson

Even though market returns may vary tremendously, rebounds can happen quickly and unexpectedly. Increased market volatility can also make market timing more challenging, since ups and downs may come closer together. History has shown that pulling money out of the market in down periods may reduce long-term returns, as markets have been up more often than not. In fact, average returns for the S&P 500 were positive 76% of the time in the period from 1937 to 2019.  


Positive versus negative annual returns for the S&P 500 (1937 – 2019)
 

Missing Out on Market Gains - Cost of Missing out on the ten best days of the stock market


Source: Legg Mason. Returns prior to 1957 are representative of the S&P 90 Index, a value-weighted index based on 90 stocks. Performance shown reflects the effects of dividend reinvestment. This chart is for illustrative purposes only and does not represent actual performance, past or future, of any investment. Past performance is no guarantee of future results. The S&P 500 Index (S&P 500) is an unmanaged index of 500 stocks that is generally representative of the performance of larger companies in the U.S. Performance does not reflect the impact of fees and expenses. Investors cannot invest directly in an index. Unmanaged index returns do not reflect any fees, expenses or sales charges.

Finding Opportunity Amid Chaos:
Strategies for Uncertain Times 

Wild swings in stock and bond prices have tested the resolve of investors. But market volatility can generate moments of great opportunity. 


 


Your financial professional can help you develop a long-term investment plan with a balance of strategies that addresses your need for portfolio growth, income, capital preservation and risk management.

 

 

All investments involve risk, including possible loss of principal. Past performance is no guarantee of future results. Indexes are unmanaged, and not available for direct investment. Index returns do not include fees or sales charges.

Equity investments generally provide an opportunity for more capital appreciation than fixed income investments, but they are subject to greater market fluctuations.

Diversification does not assure a profit or protect against market loss.

Any information, statement or opinion set forth herein is general in nature, is not directed to or based on the financial situation or needs of any particular investor, and does not constitute, and should not be construed as, investment advice, forecast of future events, a guarantee of future results, or a recommendation with respect to any particular security or investment strategy or type of retirement account. Investors seeking financial advice regarding the appropriateness of investing in any securities or investment strategies should consult their financial professional.