What a Difference A Day Can Make

September 1, 2020  |  

What a Difference A Day Can Make

Key Takeaways

  • Every financial decision, no matter how small, can have a big impact on your life.
  • Don’t let fear (or greed) cause you to second-guess your long-term plan.
  • If your money was only sitting on the sidelines for the market’s best 25 days over 30 years, your return would be cut in half

Throughout my career, I have learned (and relearned) the core principals of wealth management and investing.  I’m sure every profession has certain tenets–facts that have been proven again and again to a point they become established facts beyond question. Our firm calls this “Evidence-Based Investing.

I was recently reminded of one of these core principals during an eye-opening client experience. More on that in a minute. During these challenging times, it’s more important than ever to revisit our core tenets of investing and wealth management.

Take market timing.

For as long as I can remember, I have seen charts like the one below which look at the stock market over very long periods of time. That chart shows you how much your money would have grown had it stayed fully invested in the market for the entire period. The growth is usually impressive. In this case, the $1,000 you invested in 1990 would have grown to over $17,000 by 2019—a nearly 10% annualized rate of return (see first bar from left). But what’s even more eye-opening, is the amount of growth you would have missed out on had you taken your money out of the market for even just a few poorly chosen days during that 29 year period.

For instance, if you were out of the market on the market’s best single day between 1990 and 2019, your annualized return for the period would be only 9.56% vs. 9.96%. If you missed only the five best days, your annualized return would be down to 8.47% and it gets worse if you missed the market’s best 15 and best 25 days, etc. The conclusion: Miss only the 25 best days over a 30-year period, and your return is reduced by halfAmazing

That’s why you don’t want to over-react during times of stress.

Reacting Can Hurt Performance


Real world example

Client confidentiality is critical to our clients and sacred to us.  It is the basis of trust.  Rest assured, my client gave us his permission to tell his story to help others.

A long-term client and friend of mine (let’s call him John) was concerned when he called me recently. He wanted to know why the return on his trust account was about 5-percent lower than the return on his primary investment account, even though the two accounts were invested almost identically. There had to be a mistake, he pleaded.

Not necessarily.

It didn’t seem right to me either, but then I remembered at the end of March, during the height of the COVID pandemic, John could not stomach the market volatility anymore. He instructed us to sell all of the equity holdings in the trust account, but he left his much larger primary account fully invested. Approximately five days later, he had second thoughts, and instructed us to re-invest the trust to its prior allocation of equities.

Surely, a couple of days out of the market could not explain a greater than 5-percent difference in return. This had to be a software glitch, right? We dug into the numbers and we dug into the software and everything seemed to be calculating correctly. So, why was there such a significant difference after just a few months?  It just did not make sense.

Or did it?

The answer could be found within the mere five days that John’s trust account was not invested in stocks. On the fifth day that his trust account held no stocks (late March 2020), his primary account portfolio went up over 5 percent in just a single day as the markets surged! But his trust account missed out on that run-up.

Excitedly, I called John to let him know we found the answer to the returns-riddle. I told him it was all due to being out of the market on that one single heavily bullish day in late March. He was relieved to know the answer, but he was still shocked by the opportunity cost of his decision. Missing out on one single day in the market ended up costing him more than $200,000 in potential gains.

I told him not to worry. The bulk of his portfolio remained fully invested and so he was not completely missing out on the market recovery. I reminded him that March (2020) was an extraordinary time and that he was not alone.  Millions of investors could not stomach the violent drops in the market during those frightening early days of the pandemic. I told him that we all make the best decisions we can, given the information we have at the time. 

John learned an important lesson from that experience. I reminded him that he’ll be better equipped to make decisions next time he’s faced with a crisis.  He gave me his permission to tell this story, and we hope it helps you make better decisions, too.


If you are worried about the market, economy or the election or perhaps you are considering selling, or regret selling recently, please contact me any time. I’m happy to talk to you without judgment, cost or obligation.  As you can see from this example, every financial decision, no matter how small, can have a big impact on your life.


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About Mark Rioboli, CFP®, CFS

Mark A. Rioboli, CFP®, CFS is Director of Wealth Management for Independence Advisors, bringing over 30 years of experience in the wealth management industry. Have a question for Mark? CLICK HERE TO ASK MARK
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