Get out. Wait for it to stabilize. Get back in when things look better.
It sounds reasonable. But in practice, it’s one of the most expensive mistakes an investor can make.
Here’s why.
JP Morgan runs this study every year. The numbers change slightly, but the conclusion never does.
If you invested $100,000 in the S&P 500 in 2003 and just left it alone – through 2008, through COVID, through 2022, through all of it – you’d have roughly $640,000 by 2023.
Miss the 10 best days in that same period? $290,000.
Miss the 20 best days? $180,000.
Miss the 30 best days? $110,000.
Thirty days out of 7,300. Less than half a percent of all trading days. That’s the difference between $640,000 and $110,000.
Here’s the part that really stings.
The best days in the market almost always happen within two weeks of the worst days. They’re neighbors. You can’t have one without the other.
So when you bail after a brutal week – which feels like the only rational thing to do – you almost guarantee you’ll miss the snapback. And the snapback is where the money is made.
The market doesn’t reward the people who saw it coming. It rewards the people who stayed.
One more thing.
The easiest time to learn this lesson is right now – when the markets have been up and to the right for the better part of three and a half years. Nobody’s panicking. Nobody’s calling us to ask if they should get out. The emotional pressure is off.
That’s exactly when this stuff needs to land. Because when the bad week/month/quarter/year actually comes – and it will – you won’t have the mental bandwidth to think clearly. You’ll just feel it.
So internalize it now. When it’s easy. So that when it’s hard, you already know what to do.
This isn’t a hot take. It’s not a market call. It’s just math.
Stay in. Stay diversified. Stop watching CNBC.
That’s it. That’s the whole strategy.
All investing involves risk, including the possible loss of principal.
Past performance is not indicative of future results.