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Some investors believe
it’s possible to catch and ride each wave of the
stock market. But, experience has shown that the time spent waiting for the perfect opportunity to jump in and out may have dampening effects on the overall return of an investment. The in-and-out approach to investing doesn’t compare to the performance of staying focused and staying invested; staying in may allow you to take advantage of market highs.
Consider:
- If you held the S&P 500 Index from December 31, 1997, through December 31, 2007, your portfolio would have an average annualized return of 5.8 percent.
- If you took the in-and-out approach during a 5- or 10-year period, you may have missed some, if not all, of the best single-day performances of the S&P 500 Index.
- If you had missed the market’s 10 best days, your 10-year average annual return would have dropped to 1.1 percent.
- If you missed the top 20 days in a 10-year period, your return would have dropped to an average annualized return of -2.6 percent and if you missed 30 of the top days, your portfolio would face an average annualized return of -5.7 percent.
|
S&P 500 Index Average Annual
Return (%): |
Period of Investment |
5-year
12/31/02 - 12/31/07 |
10-year
12/31/97 - 12/31/07 |
|
Staying in |
12.7% |
5.8% |
|
Missed top 10 days |
6.5% |
1.1% |
|
Missed top 20 days |
2.0% |
-2.6% |
|
Missed top 30 days |
-1.7% |
-5.7% |
Source: Ned Davis Research, Inc.
Past performance is no guarantee of future results.
The S&P 500 Index measures the performance of 500 widely held stocks; performance reflects the reinvestment of distributions. Indexes are unmanaged and do not include sales charges or fees that would be paid by an investor purchasing the securities they represent. Such costs would lower performance. It is not possible to invest directly in an index. The indexes and their returns are not representative of any specific investment.
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