The total return of the S&P 500 index over the past five calendar years (2011-2015) is +80.7%. The 13 best trading days during those five years (i.e., 13 days out of 1,258 total trading days) produced a 55.1% gain. Thus, 1% of the trading days were responsible for 68% of the index’s total return. *
20-plus years ago, Jerry and I used to record a cassette tape–yes, that’s right, a cassette–and send it out with the quarterly performance packet. We would do a market analysis and usually conduct an interview with an academic like Gene Fama or Ken French. Often, the tape ended with me saying to our clients, “Stay the course.”
Neither Jerry nor I ever took credit for the statement. We were simply trying to reinforce a behavior for our clients, as well as ourselves, that was supported by years of evidence originating with academics and investment professionals with far more experience and knowledge than we possessed.
This recent example is one of many we have experienced over the past 20 years. While this may be a different market, a different timeframe, the message remains consistent.
When we are investing in markets, not managers or trends, and when we are disciplined to remain invested and not attempt to time markets, we will be rewarded for “staying the course.”
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