What this lesson is about
Missing just a handful of a decade's best trading days can badly damage long-term returns, and those best days routinely land right when it feels least safe to be invested.
Part 1 of 2
Trying, to, time, the, market, means, predicting, short-term, price, direction., You, need, to, sell, just, before, a, drop, and, buy, back, in, before, the, next, rise., It, sounds, appealing,, but, it’s, tough, to, do, consistently., Even, professional, investors,, with, more, data, and, resources,, struggle, with, this., The, main, issue, is, simple:, you, have, to, be, right, twice., First,, you, need, to, pick, the, exit., Then,, you, have, to, choose, the, re-entry., Just, one, costly, mistake, can, wipe, out, the, gains, from, many, good, calls.
Historical, data, shows, why, missing, even, a, few, of, the, market's, best, trading, days, can, hurt, long-term, returns., A, small, number, of, exceptional, days, often, make, up, a, large, portion, of, the, market’s, total, long-run, gain., These, best, days, don’t, come, during, calm, periods., In, fact,, many, of, the, biggest, rebounds, have, happened, just, after, the, market’s, worst, drops., This, is, when, many, investors, feel, tempted, to, sell.
Quick check
What does "timing the market" mean, as an investing strategy?
Market timing means attempting to predict short-term price direction accurately enough to buy low and sell high on a repeated, reliable basis.
Part 2 of 2
Quick check
What does historical data on the market's single "best days" repeatedly show about missing just a handful of them?
A small number of exceptionally strong days often account for a disproportionate share of a market's total long-run gain, which is exactly why missing even a few of them can meaningfully hurt returns.
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