Key Takeaways
- Missing just the 10 best S&P 500 days over 20 years reduces annualized returns by approximately 50% (from 9.8% to 4.8%).
- The best market days tend to cluster near the worst days, making it nearly impossible to capture gains while avoiding losses.
- Successful market timing requires ~74% accuracy; professional forecasters average only 47.4% — worse than random.
- Over every rolling 20-year period since 1926, the S&P 500 has produced positive real returns.
- Buy-and-hold with periodic rebalancing is the evidence-based winning strategy for virtually all investors.
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Test Your Knowledge
1.According to J.P. Morgan, what annualized return did an S&P 500 investor earn if they missed the 10 best days over 20 years (ending 2022)?
2.According to Sharpe (1975), what accuracy rate must a market timer achieve to match a buy-and-hold investor?
3.What was the average accuracy rate of 68 prominent market forecasters tracked by CXO Advisory Group?
4.How quickly did the S&P 500 rally from its March 2020 COVID low to recover to 3,380?