When markets decline, it can be tempting to pull your money out until things calm down. But that could be a mistake. Even if you sell early in a downturn, it’s impossible to know the right time to get back in.
The chart below compares the returns of a hypothetical investment of $1,000 in the S&P 500 from 2012 to 2022. Investors who remained steadily invested would have seen their $1,000 investment almost triple in value, growing to $2,692. However, investors who missed 40 of the best days during that period could see their investment top out at $646 — 76% less.
The lesson: Focus on time in the market, not timing the market.