Time in the market beats timing the market
It's tempting to wait for the “right moment” to invest, or to sell before a fall. This lesson uses the actual S&P 500 (the SPY fund) from 24 Aug 2021 to 27 Oct 2026, 1,299 trading days, to show why that's so hard.
1. Missing just a few days
£1,000 invested the whole time vs the same, but out of the market on the 10 best days.
| Scenario | £1,000 became | Per year |
|---|---|---|
| Invested every day | £1,719 | +11.0% |
| Missed the 5 best days | £1,342 | +5.8% |
| Missed the 10 best days | £1,164 | +3.0% |
| Missed the 20 best days | £904 | −1.9% |
| Missed the 30 best days | £720 | −6.2% |
The catch: the best days usually come right next to the worst ones, in the middle of scary falls. Missing the 10 worst days would have turned £1,000 into £2,622, but nobody can reliably pick which days to skip.
2. Perfect timing vs terrible timing
Investing £200 every month for 62 months (£12,400 in total):
| Perfect timing: always bought at the month's lowest price | £19,582 |
| Just invested on the first day of each month | £18,987 |
| Terrible timing: always bought at the month's highest price | £18,409 |
| Kept it as cash (no interest) | £12,400 |
| Lump sum: all £12,400 invested on day one | £21,321 |
Perfect timing beat simply investing every month by only 3.1%, and even the worst possible timing finished 48% ahead of cash. The bigger factor is being invested at all.
- A handful of days drive a large share of long-term returns
- The best days tend to arrive during frightening falls, when sitting out is most tempting
- Regular investing removes the need to guess; when markets rise over time, lump sums usually win because the money is invested sooner
Uses SPY share prices only (dividends would add about 1–2% a year) in US dollars. Past performance doesn't guarantee future returns.