I written many times before on the importance of staying invested. Recently I wrote about the impact on returns for the DAX Index based on a study by Sutor Bank of Germany. The study also included effect on returns for missing out the best days on other country indices. For the S&P 500, if an investor missed the 17 best days in the 31 year period from 1988 to 2018 then the return was cut in half. For the FTSE 100 just missing the 5 days was enough to halve the return.
Country comparison: In the UK, 5 missed days are enough to cut returns in half
The cross-border analysis of Sutor Bank has shown that it looks very similar with other stock exchanges in the world. The evaluation is on a euro basis; in local currency the results are similar. For the Swiss SMI, it was enough to have missed the best 17 days between 1988 and 2018 to halve its return. With the American S&P 500 it is also 17 days, with the MSCI World 12 days – with the Hang Seng index only 9 days, with the French CAC40 only 6 days, and with the British FTSE 100 even only the 5 best missed trading days, by half Forfeiting returns. Even more serious: With the FTSE 100, for example, you only had to have missed the best 14 trading days over a 31-year period to even generate a negative annual return. At the Swiss SMI, it took 47 days.
Table: Number of best missed trading days and effects on returns – by country indices (period: 31 years; 1988-2018; in euros)All data refer to euros; Currency effects have an impact on returns; no data for Japan / Nikkei, as the market here was negative overall; Observation period: 1.1.1988-31.12.2018
The key takeaway is investors should never try to time the market. Time in the market is more important than timing the market. Otherwise just missing a handful of days – 17 days to be exact in a long 31 year period is enough to lose half the returns (S&P 500).
