It Seemed Like A Good Idea At The Time

Published on: 07/19/2022

In this edition of Chart Talk, Tony Ogorek and Jeff Viksjo discuss time in the market versus timing the market by looking back at the returns of the S&P 500 over the last 20 years.

 

TRANSCRIPT

 

TONY:

Welcome to another edition of Chart Talk.  I’m Tony Ogorek.  I am here with Portfolio Manager, Jeff Viksjo.  And Jeff, the title of our bit today is, “It seemed like a good idea at the time”.  And I think that is going to be what people are going to be telling themselves in a year if they’re contemplating getting out of the market right now, as it’s down 20 some-odd percent.

 

JEFF:

Yeah, I think you’re right Tony. And that’s proven the case, whether it was the COVID downturn, the Great Financial Crisis, or even that sharp downturn we saw around Christmas of 2018. The markets always comeback.  This chart paints a nice picture for us.  And what it shows you is that if you invested $10,000 in the stock market, about 20-years ago, and held all the way through.  Didn’t bail when the market declined.  That $10,000 would of returned about 9.5% per year, or be worth now $62,000. That’s a pretty nice return.  What’s very interesting about this chart is it shows that if you just missed the 10 best days over 20-years, not 10 days per year – but 10 days total over 20-years (that’s about 5,000 trading days), your returns would be cut in half.  Pretty amazing Tony.


TONY:
It is Jeff. And that’s about 2-tenths of 1% is giving you half the returns over 20-years.  And the remarkable thing is if you missed the 30 biggest gain days over 20-years, you essentially earn nothing.  You are getting what cash is. So, to frame it another way, the 30 biggest gain days in the market over 20-years is the difference between cash returns and stock returns.

And Jeff, talk about the proximity of blowout returns on the downside, as well as the upside.

 

JEFF:

Yeah, what’s really interesting is these 10 best days, they’re not entirely random.  7 of those best 10 days in 20-years, came within 2 weeks after one of the 10 worst days.  Tony, we’re in the midst of a 20% decline in stocks, you know, we’re in the worst days right now. Hopefully that means the best days are coming soon after.

 

TONY:

Thanks Jeff.  You know, markets are perverse.  Just when you think they are going to zig, they’re going to zag.  Nobody, and I mean nobody, can accurately predict the future. Which is why our best advice for clients is to stay the course.  Invariable you are going to pick up some of those big gain days and that’s going to make all the difference in your performance.

So, thank you for sharing this edition of Chart Talk with us.

 

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Comments:

Sister Emily Therese July 19 2022

Thank you. I'll pray for "better days" for the markets. And, I know that our finances are in good hands -- OWM's hands!