Missing the Worst Days
Most investors are taught the same idea. Miss the 10 best days, and your returns suffer.
It is repeated often, and with conviction. The inference is clear: stay invested, at all times.
It is intuitive. It is also incomplete.
It is worth asking why this particular framing is so persistent. The industry spends a great deal of time emphasizing what happens if you miss the best days. Far less attention is given to the other side of the distribution – what happens if you avoid the worst ones.
The asymmetry is not accidental.
Carl Jacobi, the 19th-century mathematician, offered a simple approach to such complex problems:
Invert, always invert. Instead of asking what happens if you miss the best days, what happens if you avoid the worst ones?
The answer is best seen in the arithmetic. Over long periods of time, the difference is striking:
Decade
1930s
1940s
1950s
1960s
1970s
1980s
1990s
2000s
2010s
2020s
Since 1930
Return per decade
-42%
35%
257%
54%
17%
227%
316%
-24%
190%
18%
17,715%
Miss 10 Best days
-79%
14%
167%
14%
-20%
108%
186%
-62%
95%
-33%
28%
Miss 10 Worst days
39%
136%
425%
107%
59%
572%
526%
57%
351%
125%
3,793,787%
Miss Both 10s
-50%
51%
293%
54%
8%
328%
330%
-21%
203%
27%
27,213%
Source: Bank of America. 2020s data through March 31, 2023.
The conclusion is not subtle.
Avoiding the worst days improves long-term outcomes materially more than capturing the best ones. The difference is decisive.
There is, however, an important nuance.
The best days and the worst days do not occur independently. They tend to cluster together – appearing in the same environments, typically during bear markets, dislocations, and periods of heightened volatility.
Which means the very periods that generate the strongest recoveries are also the ones that inflict the greatest damage.
This is why the final column in the table matters most. Step aside during volatile periods, and you will likely miss the best days alongside the worst. But the math is clear: even missing both leads to better outcomes than blind participation.
This complicates the conventional advice.
The ‘stay invested’ advice is directionally sound. But it is not sufficient.
If outcomes are shaped by the avoidance of severe losses, then participation alone cannot be the objective. The nature of that participation begins to matter.
No one can consistently time markets. But markets can be assessed. Extremes can be identified. Prices can, at times, diverge meaningfully from underlying value.
When such conditions emerge, the objective is not to predict what comes next. Rather, it is to recognize when the balance of outcomes has become unfavorable – and to step away from the environments where the cost of being wrong is highest.
If the worst outcomes are concentrated in specific periods, then they simply cannot be treated like all others.
Participation cannot be uniform. It has to adapt.
And that requires flexibility.
Much of the conventional advice is framed within a single asset class – typically equities. Within that constraint, the range of actions is limited: you are either in, or you are out.
A broader mandate does more than expand what is possible. It allows you to solve the problem others are forced to endure.
If the objective is to avoid periods when outcomes are most damaging, then capital cannot be confined to a single asset class.
It must be able to move – not to chase returns, but to step away from where the damage is. And to remain where compounding is least likely to be interrupted.
At its core, the idea remains simple.
We are conditioned to believe that enduring volatility is the price of long-term returns. That somehow suffering must lead to glory.
But the arithmetic shows otherwise.
Two investors can participate in the same market. One endures the full cycle; the other avoids the worst of it. They do not end up in the same place. Not even close.